INTERNAL BACKLOG ASSIGNMENT
EXPORT-IMPORT POLICIES AND PROCEDURES
Q. Discuss and evaluate EPCG scheme under 2009-2014 Foreign Trade policy.
A. The Export Promotion Capital Goods (EPCG) scheme was one of the several export-promotion initiatives launched by the government in the early '90s. The basic purpose of the scheme was to allow exporters to import machinery and equipment at affordable prices so that they can produce quality products for the export market.
The import duty on capital goods — like all other items — was high during that period, inflating the cost of capital goods nearly 50%, so the government allowed exporters to import capital goods at only 25% import duty. For ...view middle of the document...
Export proceeds are to be realized in freely convertible currency except for deemed exports. Import of capital goods imported under the EPCG scheme shall be subject to Actual User condition till export obligation is completed.
Export Obligation under EPCG scheme is required to be fulfilled by export of goods manufactured /services rendered by the applicant. There are two types of export obligation that are mandatory. First, Annual Average in which export obligation is over and above, the average level of exports achieved by the authorization holder in the preceding three licensing years for the same and similar products within the overall export obligation period including extended period, if any. Such average would be the arithmetic mean of export performance in the last three years for the same and similar products. Secondly, Specific Average which is 6 times the duty saved amount in which the Authorization holder shall also fulfil a minimum of 50% export obligation in each block of years - the first block being of 4 years and the second block is of 2 years.
Royalty payments received in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG.
EPCG Authorization holder may also source capital goods from a domestic manufacturer. Such domestic manufacturer shall be eligible for deemed export benefit under FTP. EPCG Authorization holders can opt for Technological Upgradation of existing capital good imported under EPCG Authorization. Import of second hand capital goods is not permitted under the EPCG scheme. To incentivize fast track companies to accelerate exports, there is a provision for early redemption and in cases where Authorization holder has fulfilled 75% or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specified , remaining export obligation shall be condoned.
Authorization holder is required to submit to RA concerned by 30th April of every year, report on fulfillment of export obligation.
The scheme allows one or more requests for grant of extension in export obligation period, on payment of composition fee equal to 2% of proportionate duty saved amount on unfulfilled export obligation or an enhancement in export obligation imposed to the extent of 10% of total export obligation imposed under authorization, as the case may be, at the choice of exporter, for each year of extension sought.
Such first extension in EO period can be for a maximum period of 2 years. Extension in EO period beyond two years’ period may be considered, for a further extension upto 2 years with a condition that 50% of duty payable in proportion to the unfulfilled export obligation is paid by authorization holder to Custom authorities before an endorsement of extension is made on EPCG authorization by RA concerned. In such cases, no composition fee is to be paid or...