Case study

One of the grander schemes launched in India during the ongoing pandemic that has been uniformly lauded is the Rs 1.97 trillion (US$27 bn) Production Linked Incentive Scheme for boosting manufacturing. Over five years, selected manufacturers who have attained the agreed upon parameters of performance such as incremental sales turnover, investment, exports, local value content and employment creation, would become eligible to receive the contracted incentives, ranging from 4% to 6% of the value of incremental production. In aggregate terms, the stated objective is an additional turnover of US $500 bn with an additional investment of $100 bn, thereby materially lifting the share of manufacturing from the long stagnant rate of 16% of GDP.

Unlike the much hyped “Make in India” mission launched soon after the NDA government took over the reins in 2014, the PLI scheme is a concrete measure under the Aatmanirbharta programme of 2019. In many ways, the scheme is off to a strong start with all the 13 segments of the manufacturing industry to be supported already identified, the requisite government approvals accorded for their implementation, and the norms for selecting the beneficiary units notified for ten of them. Project management units for each scheme also stand created in the relevant government outfit. For the first three schemes initiated in March 2020—mobile handsets and their specified components, active pharmaceutical ingredients and medical devices—the eligible firms, both domestic and foreign, have been selected after global invitations to join were extended. Contracts between these firms and the relevant ministries stand finalized, and they are aligned on the base year over which the incremental performance-criteria would be applied.

Going by the prescribed periodic reporting, manufacturing activity along with incremental investment are moving in the desired direction; though there is a demand from some to move the base year from 2019-20 due to the ongoing pandemic. By all reckoning, if an annual public investment of approximately US $5.5 bn for five years can cause manufacturing to grow on average by $100 bn a year, bring in $20 bn of annual investment with the concomitant benefits of local employment generation, value added to benefit MSMEs and grow exports, this initiative would be on very solid ground, meeting all criteria for cost effective public programming of resources.

Despite the promising signs, there do appear a few reasons to relook at this forward-looking measure. This includes being vigilant in order to ensure that the incentive scheme invariably remains WTO compliant. While the concerned government spokesmen have no doubt clarified that since the quantum of financial assistance being promised is not linked to the extent of exports or the local content in the production process, the envisaged assistance is compliant, we should continue to move forward with an abundance of caution to ensure the scheme is beyond WTO objection. Getting a priori endorsement for the scheme-structure from the WTO would be prudent, lest it go the way of most of our earlier schemes for export promotion, including the highly used merchandise export incentive scheme or MEIS. It is worth recalling that the international trade body’s thinking on the subject and several of its regulations, have been constantly evolving, and what may have been permitted or overlooked a few years ago may not necessarily pass muster now.

We must also be realistic and recognize that the new measure, in isolation, may not cause the anticipated surge in manufacturing, and would need to be accompanied by a host of other significant support-measures. Our track record in terms of manufacturing exports has been tardy, with Indian products generally not perceived as being globally competitive. This disadvantage has been witnessed even in traditional labour-intensive exports such as apparel, leather products and engineering goods. Of late, countries like Bangladesh, Indonesia, Mexico, Thailand, Turkey and Vietnam, which enjoy almost similar comparative advantages as India, have all out competed us for a variety of implementation-related reasons. These include more affordable electrical-power, reduced transportation and logistics costs, higher scales of production, less stringent labour regulations, and a more facilitative manufacturing and trade regime on the ground. In fact, these factors, combined with the higher cost of finance, have been persisting handicaps for India. Effectively resolving them will determine the overall growth of manufacturing and exports; not merely setting off micro level actions by participating manufacturing units.

No doubt the cost disadvantage resulting from such constraints can be partially offset by the outright 4-6% grant of sales turnover being extended to eligible entities. Such measures, along with raising of import duties and enacting other trade barriers (both of which are being liberally made use of for products under the PLI scheme) might work well to open up the huge domestic market. In the overseas markets, however, these would be of limited help. In addition, the Indian consumer, both households and commercial, would end up paying a higher price for their purchases within the country than before the imposition of the trade protection measures. Unfortunately, either way this would perpetuate inefficiency and would not fundamentally address the country’s products becoming more competitive.

Given that many of the cost disadvantages in manufacturing and external trade require effecting far reaching structural changes, these in the past have often been found virtually intractable. Indian industry could be made more competitive primarily by embracing modern technology at a more accelerated pace. Perhaps, this may be the only way forward. Our neighbour China has demonstrated that compellingly and continues to double down on technological advancements to further build up manufacturing and acquire global advantages. Though it has a top down centralized and authoritarian set up that neither India nor any freedom loving country should emulate, we can learn from its route to industrialization. It highlighted the role of mass education, vocational training, adaptive technology and deep investments in R&D of future era technologies such as artificial intelligence, robotics, and quantum computing. Its Made in China 2025 programme, launched in 2015, aims at funneling huge government spending into technologies to make the country independent of foreign suppliers for advanced chips and cutting edge software—this furthers its objective of becoming the leading technology player, and perhaps also advances its alleged, more jingoistic goal of dominating global telecommunication networks.

Indian scientists and computer engineers who perform “wonders” in the West need to be attracted back to India to help develop its technical infrastructure and build advanced hardware and software products locally. The existing culture of doing pure academic science work, or going abroad to monetise skills, has to be overhauled with the requisite wherewithal provided to convince our brightest minds that they can develop and commercialise their technologies here. The targeted investment in the PLI scheme in a few critical industries has already revived the debate on whether the government should be picking the winners and losers, and championing certain industries over others. In its next round, the focus could perhaps shift to the development of identified technologies in each critical industry rather than remain on increasing the production of specified parts and components. The widespread adoption of such futuristic technologies relevant to Indian conditions, will undoubtedly unlock the massive scaling of production and bring in a significant reduction of per unit costs. This is exactly the formidable advantage China has built for itself, thereby allowing it to dominate the major global supply chains.

Even the US now realises the need for concrete action to retain its competitiveness in manufacturing and face the Chinese challenge head on in the technology space. Facing a realistic threat of growing dependence on China, earlier this week we saw the US Senate put on a rare show of unity with both the Republicans and Democrats coming together to announce what is perhaps the most significant government intervention in industrial policy in decades as they voted to spend a quarter of trillion dollars over the next five years. That includes a $52 billion subsidy for the country’s semiconductor firms to attract foreign technology partners to build not just “commodity chips” but also cutting-edge semiconductors that use the smallest circuitry to power next-generation products. Over the next five years, another $100 bn of public expenditure is envisaged in scientific research and development of emerging technologies. Once the American House of Representatives approves the plan, the Biden administration would seek to create pipelines for giving grants and fostering agreements between private companies and research universities to encourage breakthroughs in new technology relevant for the fourth and fifth generation of the industrialisation process. Apart from ensuring that it does not lose its leadership in tech related manufacturing and telecommunications to its adversary China, US lawmakers are also banking on the expectation that this would create millions of jobs down the road.

Returning to the structure of the PLI scheme, the Union government should also consider making it “politically neutral” by entering into legally enforceable contracts with each participating entity. This would help accelerate inflows of FDI into Indian manufacturing; something that has not significantly materialised so far, except in a handful of segments such as automobiles, their components, and the generic pharmaceutical industry. Apart from the expected rate of return on equity, a major consideration that invariably plays on the minds of foreign investors is political stability in the destination-country receiving their FDI. With international agencies giving a higher rating to nations displaying this character, legal protections help determine the cost of raising capital for investment in developing countries. With the PLI entitlement becoming legally binding, the sectors of manufacturing selected for PLI would receive a virtual upgradation in their ratings. Of course, when finalising such contracts, the Indian government must also deal with important issues of domestic policy changes, taxation rates and other regulations that have the potential to impact manufacturing operations. Ensuring the stability of the manufacturers’ balance sheets would be critical to preclude them from becoming the subject of long-winded future litigation.

To guard itself against the baseless allegation of promoting crony capitalism, the Union Government has taken care to streamline the selection process of ‘beneficiary units’ and made it compulsory to globally and publicly invite expressions of interest. It may also be advantageous to make the process of selection more independent of government, by leaving it entirely to a body of experts appointed for each industry. Experts must have the requisite domain knowledge, and an ability to separate the grain from the chaff while drawing up the norms for selection and undertaking the actual process. In the ultimate analysis, to be successful, the scheme must promote widespread adoption and incorporation of modern technology to make the country’s production processes stand up to global competition and plug local manufacturers into the important global supply chains. There is a strong case to also involve such independent, external groups on an ongoing basis in the monitoring and evaluation of progress made by each firm and the payouts of committed funding. Such a delegation of authority would only strengthen the much-warranted public confidence in this important government programme.

4.1 Financial incentives available to Indian exporters-

Marketing Development Assistance (MDA )

A Market Development Assistance Scheme is currently operated by the Ministry of Commerce with a view to encourage exporters (including MSME exporters) to access and develop overseas markets. The scheme offers funding for participation in international fairs, study tours abroad, trade delegations, publicity, etc. Direct assistance under MDA for small- scale units is given for individual sales-cum-study tours, participation in fairs/exhibitions and publicity. SIDBI operates a scheme of direct assistance for financing activities relating to marketing of MSME products. The Office of DC (MSME) has an existing scheme for participation in international fairs, whereby MSME entrepreneurs are encouraged to display their products at international exhibitions abroad. MSME-DO provides exhibition space and shipment of exhibits ex-Mumbai free of cost for this purpose. The scheme offers funding for:

1. Participation by manufacturing Small & Micro Enterprises in International Trade Fairs/ Exhibitions under MSME India stall.

2. Sector specific market studies by Industry Associations/ Export Promotion Councils/ Federation of Indian Export Organisation.

3. Initiating/ contesting anti-dumping cases by MSME Associations.

4. Reimbursement of 75% of one time registration fee (w.e.f. Ist January 2002) and 75% of annual fees (recurring) (w.e.f. Ist June 2007) paid to GSI (Formerly EAN India) by Small & Micro units for the first three years for bar code.

The objective of MDA are-

(i) To encourage Small & Micro exporters in their efforts at tapping and developing overseas markets.

(ii)    To increase participation of representatives of small/ micro manufacturing enterprises under MSME India stall at International Trade Fairs/ Exhibitions.

(iii)  To enhance export from the small/ micro manufacturing enterprises.

(iv)  To popularise the adoption of Bar Coding on a large scale.

Market Access Initiative (MAI)

Market Access Initiative (MAI) Scheme is an Export Promotion Scheme envisaged to act as a catalyst to promote India’s exports on a sustained basis. The scheme is formulated on focus product-focus country approach to evolve specific market and specific product through market studies/survey. Assistance would be provided to Export Promotion Organizations/Trade Promotion Organizations/National Level Institutions/ Research Institutions/Universities/Laboratories, Exporters etc., for enhancement of exports through accessing new markets or through increasing the share in the existing markets. Under the Scheme the level of assistance for each eligible activities has been fixed.

The following activities will be eligible for financial assistance under the Scheme:

Eligible Agencies

Assistance to States for Infrastructure Development for Exports (ASIEDE)

ASIDE stands to the states for Development of Export Infrastructure and other activities. Exports have come to be regarded as an engine of economic growth in the wake of liberalization and infrastructural reforms in the economy. A sustained growth in export is, however not possible in the absence of proper and adequate infrastructure, as adequate and reliable infrastructure is essential to facilitate unhindered production, cut down the cost of production and made our exports internationally competitive. The role of the State Government is critical from the point of view of boosting production of exportable surplus, providing the infrastructural facilities such as land power, water roads, connectivity, pollution control measures and a conducive regulatory environment for production of goods and services. The objective of the scheme is to involve the states in the export effort by providing assistance to the State Governments for creating appropriate infrastructure for the development and growth of exports. The states do not often have adequate resources to participate in funding of infrastructure for exports. The proposed scheme, therefore, intends to establish a mechanism for seeking the involvement of the State Government in such efforts through assistance linked to export performance. The scheme shall provide an outlay for development of export infrastructure which will be distributed to the states according to predefined criteria. The existing EPIP, EPZ, CIB schemes shall be merged with the new scheme. The scheme for Export Development Fund (EDF) for the North-East and Sikkim shall also stand merged with new scheme. After the merger of the schemes in respect of EPIP, EPZ, CIB and EDF for NER and Sikkim with the new scheme, the ongoing projects under the scheme shall be funded by the states from the resources provided under the new scheme. The activities aimed at development of infrastructure for exports can be funded from the scheme provided such activities have an overwhelming export content and their linkage with exports is fully established. The specific purposes for which the funds allocated under the Scheme can be sanctioned and utilised are as follows:

Industrial Raw Material Assistance Centre (IRMAC)

Raw Material Assistance Scheme aims at helping MSMEs by way of financing the purchase of Raw Material (both indigenous & imported). This gives an opportunity to MSMEs to focus better on manufacturing quality products. The Entrepreneurs are required to apply for Raw Material Assistance only on the prescribed application forms. The application forms downloaded from the link given below may be filled and can be submitted to the nearest Branch Office. The blank forms are also available free of charge from the Branch offices. The Process of getting such assistance are-

The following benefits are provided under the scheme:

Key takeaways-

4.2 Institutional Assistance to Indian Exporters-

Federation of India Export Orientation (FIEO)

Federation of Indian Export Organizations (FIEO) is an apex body of various export promotion organisations. It was set up in October 1965. It represents the Indian entrepreneur’s spirit of enterprise in the global market. It has kept pace with the country’s evolving economic and trade policies and has provided the content, direction and thrust to India’s expanding international trade. As the apex body of all Indian export promotion organisations, FIEO works as a partner of the government of India to promote Indian exports.

The following are the important functions of federation of Indian export organisation.

(a)    International linkage

It has forged strong links with counterpart organizations in several countries as well as international agencies to enable direct communication and interaction between India and world businessmen. It is registered with UNCTAD as a national non-government organisation, and has direct access to information and data origination form UN bodies and world agencies like the IMF, ADB, ESCAP, World Bank, FAO, UNIDO and others.

(b)    Dissemination of Information

It has bilateral arrangements for exchange of information as well as for liaising with several overseas chambers of commerce and trade and industry associations.

(c)    Liaising with Government

It sends representations on policy matters to Central and State (regional) governments. It helps in establishing contacts between the government and commercial bodies both in India and overseas.

(d) Market Development Assistance (MDA)

The ministry of commerce, government of India, through FIEO, reimburses certain percentage of the expenditure incurred by the recognized exporters, such as all types of export houses, on sales cum study tours, participation in exhibition and fairs abroad, advertisements in foreign media etc.

(e) Market Research and Development Department

The market research and development department offers the following services to the exporters community i.e.- Arranging meeting with diplomats, incoming delegations and buying missions, inviting delegations, organizing trade fairs and exhibitions in India as well abroad opening foreign offices and warehouses, organizing seminars for promotion of international trade, opening new FIEO offices abroad.

(f) Publicity Department

The publicity department of FIEO performs the following functions- Bringing out various special supplements in Indian and overseas dailies in order to project the selected finished products in India and abroad. Creating and telecasting episodes in NEPC channel to promote India‟s prominent brands in various countries covered by the channel. It has published directory of foreign buyers and dictionary of Indian exporters. It publishes a fortnightly magazine “FIEO NEWS” to cover development in the field of international trade concerning India.

India Trade Promotion Organisation (ITPO)

Indian trade promotion organisation was set up by the Ministry of Commerce, Government of India, on 1st January, 1992 with its headquarters at New Delhi after the merger of Trade Development Authority (TDA) and Trade Fair Authority of India (TFAI). It has five regional offices in India at Mumbai, Bangalore, Kolkata, Kanpur and Chennai and four in Germany, Japan, UAE and USA. As a premier trade promotion agency of the government of India, the ITPO provides a broad spectrum of services to trade and industry so as to catalyse the growth of bilateral trade, particularly India’s exports and technological up gradation and modernisation of different industry segments.

The following are the functions or activities of Indian trade promotion organisation-

(a)    Organising Trade Fairs and Exhibitions

ITPO organizes trade fairs and exhibitions in India and abroad and to book stalls/space for Indian exporters to participate in overseas trade fair and exhibitions. ITPO acts as a publicity wing of government of India for organizing trade fair and exhibitions in India and abroad.

(b)    Publicity

It gives publicity in connection with the organisation of trade fairs and exhibitions in India, so that foreign parties may visit India to visit in such trade fairs and exhibitions.

(c)    Collections of Information

ITPO collects information of various trade fairs and exhibitions to be held abroad. The information is collected in respect of place or venue of exhibition, date and duration, products to be displayed, booking of space formalities, etc.

(d)    Supply of Information

ITPO provides information to Indian parties regarding overseas trade fairs and exhibitions. Such information may be useful to Indian parties or exporters to take proper decisions in respect of participation in overseas trade fairs, and exhibitions.

(e)    Delegations

Inviting trade delegations from abroad and sending Indian trade delegation abroad. ITPO book orders for Indian goods. In addition, to send Indian trade delegations abroad for market survey and for signing contracts for the supply for Indian goods.

(f) Booking of Space in Overseas Trade Fairs

ITPO books necessary space/stalls for Indian exporters. This enables Indian exporters to participate in overseas trade fairs and exhibitions.

(g)    Consultancy Services

It provides consultancy services to Indian exporters to participate and display their product in trade fairs and exhibition in India and abroad.

(h)    Seminars and Workshops

ITPO organizes seminars/workshops for giving information/guidance to exporters about fairs and exhibitions arranged in India and abroad. ITPO has set up a trade information centre at its headquarters in New Delhi. It is considered as the best source of information on import and export trade.

The Federation of Indian Chambers of Commerce and Industry (FICCI)

Chambers of commerce is voluntary non-profit making and democratic associations of traders, businessmen, professionals and industrialists. The scope of activities of the chambers of commerce is winder as compared to trade associations. The Indian merchants’ chambers and the Maharashtra chambers of commerce are the examples of chambers of commerce. In India, we have also Associated Chambers of Commerce. (ASSO CHAM). The following are the various functions/role/activities of chambers of commerce in export promotion-

(a)    Issue of certificate of origin

To issue certificate of origin to members and also to issue other certificates and documents required by the exporters for different purposes.

(b)    Information on foreign markets

To collect, analyse and supply information about foreign markets, governments offered by the government and so on to the members through meetings seminars, workshops and official journal of the chamber. Library facility is also provided to members interested in exporting their goods abroad.

(c)    Sending trade delegations

To send delegations of members to foreign counties for study and survey purpose and thereby to supply information to members about potential markets available abroad.

(d)    Discussion on common problems

To provide a convenient platform to members to discuss the common problems arising out of export policies. Incentives and procedures introduced by the government from time-to-time.

(e)    Recommendation to government

It provides recommendations to the government authorities to solve export problems and suggest measures for export growth. It may advise the government in framing proper export-import policies. It may recommend certain modifications in the existing government policies and programmes.

(f) Inviting trade delegations

It may invite trade delegations from abroad both at private level and at governmental level, such trade delegations are very important to promote export trade of India. Foreign delegations visit India and sign contracts with Indian exporters.

(g)    Representation on problems of exports

To take specific problem cases of members i.e. exporters to appropriate government authorities for remedial measures.

(h)    Exploration of overseas markets

It may assist the exporter in exploration of overseas and identify items having export potential. It may also assist the exporters to open offices of branches abroad. It may guide the exporter in setting up of joint ventures abroad.

(i) Training in export management

To arrange short training courses in export management in order to provide education and guidance to members interested in export trade and international marketing.

Export Promotion Council (EPC)

Export Promotion Councils are non-profit organizations registered under the companies act or the society’s Registration Act, as the case may be. They are supported by the financial assistance from the Central Government. It has been made clear by the new EXIM policy that the support given to the EOCS by the government, monetary or otherwise, would depend upon effective discharge of the functions assigned to them. Democratization of the member ship of the EPCs, Democratic elections of office bearers of the EPCs being held regularly, and timely audit of the account of the EPCs. At present, there are 24+3 EPCs operating in India. The various EPCs are as follows-

Apparels EPC, Basic Chemicals, Pharmaceuticals and Cotton Textiles EPC, Carpet EPC, Cashew EPC, Engineering EPC, Gems and Jewellery EPC, Handloom EPC, Indian Silk EPC, Council for Leather Export, Plastics and Linoleum EPC, Synthetic and Rayon textiles EPC, Sports Goods EPC, Shellac EPC, Wool and woolens EPC, Electronic and computer software EPC, Handicrafts EPC, the power loom development and EPC, Export Promotion Council for EOUs and SEZ units, Project Export Promotion council of India, Pharmaceutical export promotion council, Jute manufacturers development council, Wool industry EPC. There are three other organizations considered as EPC- Agricultural and Processed Food Product Export Development Authority, Federation of India Export Organisation and the Marine Products Export Development Authority.

The following are the functions of export promotion councils-

(a)    Issue of Certificate of Origin

Certain countries demand certificate of origin from the exports. In India, EPC can issue certificate of origin to the exporter certifying the origin of goods.

(b)    Collection of Information

It collects valuable information on overseas import, import regulations, about competitors, market potential and other development in foreign trade.

(c)    Supplying of Information

It provides information on latest developments in the field of exports trade. It may relate to various aspects of foreign trade. Such information is vital to the exporters to promote their sale, abroad.

(d)    Organising Seminar

It organizes seminars, workshops, meeting and conferences on various aspects of foreign trade. Exporters are invited to take part in such seminars and workshops.

(e)    Trade Fairs and Exhibitions

It may also assist the concerned authorities in organizing trade fairs and exhibitions in India and abroad, It may also assist the exporters to take part in such trade fairs and exhibitions. It may also arrange buyer-seller meets, so as to promote Indian exports.

(f) Recommendation to Government

It apprises or advises the government authorities on current export problems and suggests measures for export growth. It also advises the government in framing proper EXIM policies from time-to-time.

(g)    Sending Trade Delegations

To make arrangements for sending trade delegation and study teams to countries for promoting the export of specific products and to circulate the reports of such visits abroad among member exporters.

(h)Professional Advice

It may provide professional advice to exporters in areas such as, technology up gradation, quality and design improvement, standards and specification, product development, innovation etc.

(i) Exploration of Overseas Markets

It may assist the exporter in exportation of overseas markets and identify items having export potentials.

(j) Developing Export Consciousness

This organisation makes all the possible efforts to develop export consciousness in our country.

Commodity Boards (CBs)

Along with export promotion councils commodity boards have been established by the government of India for many commodities with high export potential. These boards are supple- mentary to EPCs and function on the same lines. The CBs are for promoting exports of specific commodities particularly the traditional commodities including tea, coffee, etc. The commodity boards look after the export promotion of primary and traditional items of exports while the EPCs look after the export promotion of non-traditional items.

The functions and activities of commodity boards are similar to that of EPCs

(a) Issue of certificate origin,

(b) Collection of information,

(c) Supplying of information,

(d) Organising seminars,

(e) Trade fairs and exhibitions,

(f) Recommendation to government,

(g) Sending trade delegation,

(h) Professional advice,

(i) Exploration of overseas markets,

(j) Developing export consciousness.

Indian Institute of Foreign Trade (IIFT)

Indian institute of foreign trade was set up in 1963 by the government of India as an autonomous body registered under the societies registration act. It was set up with the prime objectives of professionalizing the country’s foreign trade management and increase exports by developing human resource, generating, analysing and disseminating data and conducting research. 

The following are the functions of Indian institute of foreign trade-

(a)    Training

The IIFT has been recognized as centre of excellence for imparting training and education in international business. Its specialization in international business and a global out look makes it unique among management schools in the country. If offers oan inspiring learning environment, which transforms the bright young students into talented creative professionals.

(b)    Collects Information

IIFT conducts markets studies and surveys in overseas market. It tries to find out demand for Indian products in the overseas markets. It may also study consumer preferences and competition in overseas markets.

(c)    Supplies Information

IIFT conducts market studies and surveys in the overseas markets. It tries to find out demand for Indian products in overseas market. It supplies this information to the exporters. The exporters can use such information while making their export marketing decisions.

(d)    Organises Seminars and Workshops

IIFT organizes seminars and workshops in a number of export marketing areas, such as export pricing, export promotion, etc. Exporters can take advantage of such workshops and seminars by taking active part them.

(e)    Trade Delegations

IIFT sends delegates abroad to study overseas markets and also to interact with overseas importers. At the same time, it invites delegates from abroad, who can study Indian market conditions and can also interact with Indian exporters.

(f) Professional advice

IIFT provides professional advice to exporters in a number of areas such as export pricing, export procedures, promotion etc.

(g)    Management Development programmers

Combining a unique blend of research and consultancy, IIFT has been a pacesetter in addressing to the needs of business executives by continuously aliening the focus of its management development programmes with the changing realities. As a result, its intensive short duration programmers have received the most enthusiastic response.

(h)    Publishes Information

IIFT publishes information through its journals i.e. foreign trade review (quarterly) and foreign trade bulletin (monthly).

Indian Institute of Packaging (IIP)

The Indian Institute of packaging was set up in Mumbai on 14th may, 1966 with an objective to giving guidance and training to Indian exporters, in regard to packaging techniques. It was set up by the government of India in collaboration with the industry for removing the deficiencies in the field of packages. Indian institute of packing is a registered body under the Societies Registration Act, and undertakes research activities on raw materials for packaging industry. It keeps India in line with the international developments in packaging. It is a service organization. The following are the important functions of Indian institute of packaging.

(a) Training Programme

It is primarily engaged in training programmes relating to packaging industry. This institute makes the trainees familiar with packaging technology, packaging materials, and current trends in packaging in the world markets.

(b) Improvement in Quality of Packaging

IIP makes constant efforts to upgrade and improve the design and quality of packaging, so as to promote Indian products abroad. Undertake research on raw material used of the packaging industry and to bring improvement in the quality of packaging.

(c) Collection of Information

IIP collects information on latest trends in the packaging in respect of raw materials, design etc. To keep abreast of international developments in packaging and to collect information on new trends in packaging.

(d) Testing Facilities

It also undertakes testing of packaging materials and packages to ensure export quality.

(e) U N Certification

All dangerous goods packages need a UN certification mark before they can be dispatched IIP is the only authorized body in India to give this certification.

(f) Environmental Cell

The institute has an environment cell, which guides exporters as to what type of material can be used or incorporated in the packaging of their products so as to reduce environmental threats.

(g)Research and Development

It undertakes research and development programmes for creating and improving overall infrastructural facilities for achieving packaging improvement so as to prevent losses during transportation.

(h)    Develops Packaging Consciousness

Export packaging is vital as it not only protects and preserves the product, but also promotes the product in international markets. Therefore, IIP develop consciousness of the need for good packaging among Indian exporters.

(i) Publications

It publishes two quarterly magazines, one devoted to the technological aspect of packaging and the other to techno-economic aspects of packaging.

Key takeaways-

4.3 Schemes-

Export Promotion Capital Goods (EPCG)

Under the Export Promotion Capital Goods (EPCG) scheme, the import of capital goods at 5% customs duty is allowed subject to an export obligation equivalent to 5 times CIF value of capital goods to be fulfilled over a period of 8 years. In case of EPCG licenses for Rs. 100 crore or more the same export obligation can be fulfilled over a period of 12 years.

Conditions
Import of capital goods is subject to actual user condition till the export obligation is achieved. Under this scheme, exporters are allowed to import both new and second hand capital goods with residual life of ten years. The import of second hand capital goods under the scheme is subject to certain conditions. Capital goods means, plant, machinery, Equipment, Packing machinery and equipment, Quality and pollution control, Testing instruments, Power generation sets, Machine tools, Refrigeration equipment, Research and development etc.

Who are eligible?

EPCG scheme is available both for manufacturing and service sectors including manufacturer exporters; merchant exporters tied to supporting manufacturers are eligible to import capital goods, also service providers such as hotels, hospitals, travel and tour operators etc. are eligible.

Features of EPCG Scheme

a) The EPCG licence holder can buy capital goods from domestic manufactures.

b) Whatever capital goods are imported, it is subject to actual user conditions.

c) In order to know about the progress of business, the EPCG license holder has to submit a report of his export every six months.

d) In order to continue to get the benefit of EPCG Scheme, the licence holder must fulfill the export obligations.

e) When export obligation is fulfilled, the EPCG licence holder must submit a consolidated statement of exports.

f) The EPCG licence holder will submit a certificate from his banker when payment is received from abroad.

g) EPCG is a facility given to the exporters to improve their business.

h) In order to get registered for EPCG facility, the exporter has to apply to Director General of foreign Trade (DGRT) with application fee and relevant documents.

Duty Exemption and Remission Schemes

1. Duty Exemption enable duty free import of inputs required for export production. Duty exemption schemes consist of:

a) Advance Authorisation scheme.

b) Duty Free Import Authorisation (DFIA) scheme.

2. A Duty Remission Scheme enables post export replenishment / remission of duty on inputs used in export product. Duty Remission Schemes consist of:

a) Duty Entitlement Passbook (DEPB) Scheme.

b) Duty Drawback (DBK) Scheme.

An Advance Licence is issued to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export product, may also be allowed under the scheme. A Duty Remission Scheme enables post export replenishment /remission of duty on inputs used in export product. Duty Remission Schemes consist of (a) Duty Entitlement Passbook Scheme (DEPB) and (b) Duty Drawback (DBK) Scheme.

The Financial Benefits under the scheme are as follow:

1. Duty exemption schemes enable duty free import of inputs required for export production.

2. A Duty remission scheme enables post export replenishment/remission of duty on inputs used in export product.

Re-import of exported goods under Duty Exemption / Remission Scheme

Goods exported under Advance Authorization / DFIA / DEPB may be re-imported in same or substantially same form subject to DoR specified conditions.

Value Addition

Value addition (VA) for the purpose of this Chapter (Except for Gems and Jewellery Sector) shall be:-

VA = A-B/Bx 100, where

A = FOB value of export realized / FOR value of supply received.

B = CIF value of inputs covered by authorization, plus any other imported materials used on which benefit of DBK is claimed.

Export Advance Authorisation scheme

The Advance Authorization Scheme is a scheme where the import of inputs will be allowed to be made duty-free (after making normal allowance for wastage) if they are physically incorporated in a product which is going to be exported. An export obligation is usually set as a condition for issuing Advance Authorization.

Duties exempt under the Advance Authorization Scheme

The inputs imported are exempt from duties like Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping duty, Safeguard Duty and Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess, wherever applicable, subject to certain conditions.

Duty-free importable items under the scheme-

The following items can be imported without payment of duty under this scheme:

Eligibility for Advance Authorization

The Advance Authorization Scheme is available to either a manufacturer exporter directly or a merchant exporter tied with a supporting manufacturer. The authorization is available for the following:

The validity of Advance Authorization

Advance Authorization is valid for 12 months from the date of issue of such Authorization. In the case of deemed exports, the Authorization is linked to the contracted duration of project execution or 12 months from the date of issue of such Authorization, whichever is more. However, the export obligation may be fulfilled within 18 months from the date of issue of Authorization or as notified by the DGFT. Unless specified, the export proceeds should be realized in freely convertible currency.

Actual user condition for Advance Authorization

The Advance Authorization issued and the materials imported thereunder will be with actual user condition. This means that the actual user alone may import such goods. The authorization will not be transferable even after completion of export obligation.

Grounds for issuing Advance Authorization

Advance Authorization can be issued for inputs used in the product that is to be exported on the basis of the following:

Duty Drawback (DBK)

Duty Drawback means refund of custom duties paid on the import of raw materials components and packing material. DBK also involves refund of central excise duties paid on indigenous material used in the manufacture of export products. The Duty Drawback scheme has been introduced to compensate the exporters for the additional costs in form of taxes that he has to bear, apart from the actual cost of the import. Therefore, the Central excise and customs duty paid on the imported items are reimbursed to the exporter to give him the opportunity of making his products competitive in the international markets.

Duty back is available on the following items.-

a) Raw materials and components used in the process of manufacture.

b) Materials used in the manufacture of raw materials and components used on the manufacture of finished products.

c) Irrecoverable wastages which arises in the process of manufacturing.

d) Material used for packing the finished export products.

e) Finished products.

DBK is not admissible if the –

a) Amount of drawback entitlement is less than Rs. 50/-.

b) Goods have been taken into use after manufacture except tea chest used as packing materials for export of blended tea.

c) Goods are produced using imported materials or excisable materials in respect of which duties have not been paid.

d) Products manufactured by 100% EOUs and units located in FTZs / EPZs.

e) Amount of drawback is less than 2% of net FOB value of exports.

f) Goods exported to Nepal, Bhutan, Tibet and Sing Kiang.

Procedure to claim DBK

Whom to Apply –

The application need to be made to the nearest customs House.

When to Apply –

Application must be made within a period of 60 days from the date of obtaining “Let Export Order” from the customs examiner.

What Documents Required – The application must be supported by the following documents.

a) Non-negotiable copy of Bill of Lading.

b) A copy of duty drawback,

c) A copy of commercial invoice.

d) A copy of special brand rate letter, if required,

e) Other required documents.

There are two rates of duty drawback –

a) All Industry Rates – All Industry Rates are declared by the Government of India from time to time. These rates are applicable to all units in the industry. For example, if the govt. Declares 20% DBK for textiles then all units in the textile industry can get 20% DBK.

b) Special Brand Rates – Special Brand Rates are provided by the Govt. On the special application made by a particular unit.

IGST refund

Under GST, IGST is a tax levied on all Inter-State supplies of goods and/or services and will be governed by the IGST Act. IGST will be applicable on any supply of goods and/or services in both cases of import into India and export from India. The IGST refund module has been designed to have an in-built mechanism to automatically process and grant refund after validating the shipping bill data available in ICES against the GST return data transmitted by GSTN.  Exporters of services who paid IGST on exports should complete their refund claim by applying in form RFD-1 on the GST portal in addition to GSTR-1 and GSTR-3B. An important prerequisite is to report the Bank Realisation Certificate (BRC/FIRC) number for the export invoice.

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