Trade transaction costs higher, erode competitiveness: Study

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New Delhi, Mar 19 (UNI) The prevailing trade transaction costs in the country is still higher and can erode its competitiveness, according to a study by an industry body.

Stringent and archaic rules and regulations, complex administrative processes and infrastructural deficiencies are the few factors responsible for putting unnecessary transaction costs on Indian exporters and importers, according to the study titled 'Foreign Trade Transaction Costs: An Indian Scenario', conducted by CII.

Elaborating on the Indian scenario MARS and Partners, Advocates and Solicitors Managing Partner Rajiv Tuli said over the past few years the country has undertaken considerable trade reforms.

In fact, as per the 'Doing Business 2008 Report' of the World Bank, India has been rated as the 'Top Reformer' in the world in 2007 on 'Trading across Borders'.

Inspite of these reforms, the country currently ranks 139th on this parameter amongst the 178 countries included in the World Bank report. Clearly much remains to be done, he added.

Although the Foreign Trade Transaction Costs in the country have been reducing, however, there is scope for significant reductions further, the study highlighted.

''The issue gains greater significance if we are looking at maintaining the competitiveness of Indian exports in the wake of a strengthening rupee and a possible recession in some of the leading developed economies,'' Mr Tuli added.

Some of the measures suggested by the study for reducing the Foreign Trade Transaction Costs include that every licence, issued by the Joint DGFT office, requires to be registered with the concerned customs port, which takes six-seven working days.

Hence, EDI connectivity amongst all agencies is must as a centralised database and online licensing would result in saving time and reducing costs.

The average cost of Terminal handling in India is as high as 300 dollars, six times higher compared to China. Also, lack of appropriate material handling equipment at the terminals leads to delays. Clearly, costs need to be reduced with improvement in infrastructure.

According to the study, private service providers should be encouraged to provide railway freight transportation services to bring down costs, which at present are high.

At the customs level, the study suggested that to benefit the MSME exporters, many of who are based in small towns, infrastructure at dry ports needs to be improved. They also need to be computerised through a central system of server based software to expedite documentation.

As per the existing export provisions, an exporter is required to submit licence-wise bond to the customs authorities leading to delays.

A single bond per unit for all duty free clearances under various schemes should be introduced, the study added.

The connectivity of all major customs ports through EDI system further makes this single bond provision more effective and possible as an exporter furnishing bond at one customs house can get clearance of goods at any customs port under any scheme.

It also suggested that CBEC should cover all export promotion schemes in its various cargo clearance facilitation schemes.

UNI AK SG AS1615

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