Exporters hit by incentive reduction by DGFT

New Delhi, July 11 (UNI) CII today said the reduction in the incentive under the "Target Plus Scheme" from tierd a approach of 5 to 15 per cent to 5 per cent for all exports by the Directorate General of Foreign Trade (DGFT) has hit several exporters in a big way.

According to a circular issued in October 2004, exporters who achieved a quantum growth in exports were supposed to be entitled to duty free credit based on incremental exports substantially higher than the general actual export target fixed.

However, through a Notification dated June 12, 2006 entitlement quantum of duty free import were reduced to 5 per cent on all exports made from April 1, 2005 to March 31, 2006.

The Confederation of Indian Industry (CII) has taken up this issue with the DGFT to look into the issue at the earliest, said CII's Chairman of Trade Policy committee Sanjay Budhia.

Mr Budhia said this notification will cause major losses to exporters as many of them have already closed their financial accounts for 2005-06 after audit.

Mr Budhia is of the view that the Government should reconsider the notification and restore the benefits, which were already earned by the exporters in the past year. The revision if necessary, can be effective from the next year.

According the circular No. 59/2004 issued in October 2004 the duty free credit entitlement scheme for status holders was replaced by a new scheme called the "Target Plus Scheme". The eligibility criterion under the scheme was minimum export turnover of 10 crores.

Rewards were be granted based on a tiered approach. For incremental growth of over 20 per cent, 25 per cent and 100 per cent, the duty free credits were 5 per cent, 10 per cent and 15 per cent of FOB value respectively of the incremental exports. The duty credit was used for import of any inputs, capital goods including spares and office equipment.

Mr Budhia said the two entitlement slabs of 10 per cent and 15 per cent have been removed. The exporters had priced their products in the international market after taking into consideration the incentive amount that would be available to them. This move is demoralising several exporting firms, Mr Budhia said.

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