Page 250 - DMGT401Business Environment

Unit 11: EXIM Policy

Imports Liberalisation: India retained import of items under five categorisations – the prohibited Notes
list, the Special Import Licence (SIL) list, the restricted list, the canalised list and the free list. The
number of items included in these lists keeps on changing. Of these, the restricted list has been
freed and SIL abandoned and freed. The canalised list is being retained, but under a new
nomenclature (the special list) and a new set of products. Thus, at present, the number of import
lists has come down to three – the prohibited list, the special list and the free list.

The prohibited list contains only a few products prohibited on grounds of religious and cultural
sensitivity and the list includes tallow, fat and oils of animal origin, animal rennet and wild
animals including their parts and products and ivory. Bulk agricultural commodities that include
grains excluding feed grade maize, edible oils, oilseeds, sugar, and non-agricultural products
such as urea, petroleum products are in the special list that was earlier called canalised list.
Imports of these items should be done by state agencies. Apart from the special list of consumer
products, gold will continue to be imported through designated banks. Import of all primary
products of plant and animal origin will also be subject to import permits to be issued by the
ministry of agriculture after an import risk analysis based on sanitary and photo-sanitary
measures and provisions. In addition, conditions have been prescribed for the import of new
and second and cars for ensuring road safety. Import of foreign liquor, processed food products
and tea wastes has to be made subject to already existing domestic regulations concerning
health and hygiene. Rest of the commodities are in the free list. Imports of these freed items
attract high tariffs with bound rates.

During 1997-98, the peak rate of import duty was reduced to 40 per cent ad valorem except for
passenger luggage, alcoholic beverages, dried grapes and a few other products. The peak rates
for imports of raw materials and capital goods for projects were reduced to 30 per cent and 20 per
cent respectively. However, the special additional customs duty was raised from 2 per cent to 5
per cent on all imported goods except petroleum products and certain project imports. A surcharge
of 10% on basic duty was introduced in 1998-99 mainly to control imports of consumer goods.

From 1st April 2001, removal of QRs became necessary in the face of India losing the case against
the USA. By replacing QRs with high tariffs, India indicates that its promotion of free trade is not
without restraint. In fact, high tariffs have been imposed on goods removed from QRs to protect
the domestic industry from overseas competition. WTO permits tariff setting, so far as the
applied rates do not surpass bound rates. India's applied rates are mostly lower than the bound
tariffs.

11.2 Special Export Zones ( SEZ)

The standard definition applied by international organisations states that an Export Processing
Zone (EPZ) is an industrial area that constitutes an enclave with regard to customs' tariffs and
the commercial code in force in the host country. Traditionally therefore the concept of EPZs
evolved to compensate for anti-export-bias created by the Import Substitution Industrial (ISI)
policy regime. An ISI strategy creates an incentive structure, which tends to be biased against the
export sector. The over valued exchange rate coupled with high tariffs and Quantitative Restrictions
(QRs) makes production for import substitution significantly profitable relative to production
for exports.
India initiated the process of industrial growth in 1948 (immediately after the political
independence), when it announced its first Industrial Policy Resolution, IPR 1948. The strategy
adopted was one of import-substitution industrialisation across all sectors. Within an ISI policy
framework, export promotion had also been a concern of the government. Thus, attempts to
promote the EPZ as an export platform on the basis of economic incentives, such as the provision
of better infrastructure and tax holidays became a feature of Indian development. The first zone

LOVELY PROFESSIONAL UNIVERSITY 243