Economy & Energy

• 1083 Crore Rupees Revival Plan for HMT
• National Accounting for India
• Changes in FTP 2009-14 to Enhance Trade and SEZs
• Zero Duty Export Promotion Capital Goods (EPCG) Scheme
• Reduced EO for Domestic Sourcing of Capital Goods
• Widening of Interest Subvention Scheme
• Widening the Scope of Utilization of Duty Credit Scrip
• Market and Product Diversification
• Incremental Exports Incentivisation Scheme
• WTO Slashed Trade Growth Forecast for 2013 to 3.3 Percent
• IMF Slashed World Growth Forecast to 3.3 percent for the Year 2013
• ITPO Signed a MoU with Government of India
• To Revive Interest in SEZs of Investors Government announced Changes in FTP
• Changes Implemented in IT Exports
• 4065.81 Crore Rupees for Water Pollution Control
• National Lake Conservation Plan (NLCP)

1083 Crore Rupees Revival Plan for HMT

The Cabinet Committee on Economic Affairs (CCEA) under Union Government on 18 April 2013 approved a 1083-crore Rupees renewal package for watch and tractor maker company HMT. The approval of the revival Plan Directly aims to modernise the company and help it turn around in five years. The package approved basically includes a cash infusion of 450 crore rupees and a non-cash assistance of 630 crore Rupees.

Significance of the Package Approved

• The package is aimed at turning the loss making company to profit-making one over five years by increasing production.
• The cash component of the package will be used for modernization, working capital needs and wage revision.
• The company also aims to hike production to 30000 units from the current 4500 units over five years.

National Accounting for India

Two-day International Workshop on Green National Accounting for India finished in New Delhi on 6 April 2013. The Government of India established the expert group under Ministry of Statistics and Programme Implementation (MOSPI) in August 2011. The aim of this expert group was development of framework for green national accounts, identification of data gaps and preparation of a road map to implement the framework. The expert group conducted in-depth deliberations on these issues over past one and half years. The report was submitted in the international workshop. The report called, Green National Accounts in India –A Framework was released by the Prime Minister of India, Manmohan Singh on 5 April 2013. The Green National Accounts in India –A Framework report reflected the state of economy. It also formed the raw material for assessment and policy formulation. This report consisted of six chapters and includes conceptual foundations of economic evaluation. The report also deals with not only the conceptual building up of the system of Green National Accounts, but also deals with the implementation ability aspects based on the conceptual framework of Green Accounting Framework.

Changes in FTP 2009-14 to Enhance Trade and SEZs

Union Minister for Commerce, Industry and Textiles, Anand Sharma released the Annual Supplement 2013-14 to Foreign Trade Policy (FTP) 2009-14 18 April 2013 at Vigyan Bhawan, New Delhi. During the fiscal year 2012-13, the export of India grew to 300.60 US Billion Dollar from 300 US Billion Dollar, but it fell by 1.76 percent previous year. The trade deficit which was 183.4 US Billion Dollar last year has increased to 190.91 US Billion Dollar. On this occasion of releasing the Annual Supplement 2013-14 to Foreign Trade Policy 2009-14 the government introduced many strategic Changes to policies to revive the interest of the investors in Social Economic Zones (SEZs) as well as to boost exports.

Few of the important changes introduced

Changes in SEZs

• Size of total area of land required for development of SEZs have been reduced
• Graded Scale for Minimum Land Criteria has been introduced
• Flexibilities are introduced to set up additional units sector specific SEZs
• Policy to provide duty benefits to pre-existing structures and activities being undertaken after notification have been introduced
• In IT SEZs, the criterion of minimum land area of 10 hectares has been done away

Zero Duty Export Promotion Capital Goods (EPCG) Scheme

Foreign Trade Policy has two variants under this scheme, Zero Duty EPCG for few sectors and 3% Duty EPCG for all sectors. On 5 June 2012, a new Post Export EPCG Scheme was also announced which was notified on 18 February 2013 by the CBEC. Now the Union Government has decided to merge the Zero Duty EPCG and 3% EPCG Scheme into one scheme and make it a Zero Duty EPCG Scheme covering all sectors.

Salient Features of the Zero Duty EPCG includes

• Authorization holders will have export obligation of 6 times the duty saved amount. The export obligation has to be completed in a period of 6 years
• The period for import under the Scheme would be 18 months
• The discharge of Export Obligation by export of alternate products and the accounting of group companies has been barred
• The benefits of the Zero Duty EPCG Scheme can be availed by the exporters who have availed benefits under Technology Upgradation Fund Scheme (TUFS) administered by Ministry of Textiles
• Under the new Zero Duty EPCG Scheme, import of motor cars, SUVs, all purpose vehicles for hotels, travel agents, or tour transport operators and companies owning/operating golf resorts will not allowed

Reduced EO for Domestic Sourcing of Capital Goods

• The quantum of specific Export Obligation (EO) in the case of domestic sourcing of capital goods under EPCG authorizations has been reduced by 10%. This would promote domestic manufacturing of capital goods.

Reduced EO for units in the State of Jammu & Kashmir

• To encourage manufacturing activity in the State of Jammu & Kashmir the specific export obligation (EO) is reduced to 25% of the normal export obligation. Earlier, this benefit was announced on 5 June 2012 in respect of units located in North Eastern Region and Sikkim and the same provision is now being extended to J&K.

Widening of Interest Subvention Scheme

• Presently there exists availability of 2% interest subvention scheme to certain specific sectors like Handicrafts, Handlooms, Carpets, Readymade Garments, Processed Agricultural Products, Sports Goods and Toys. The scheme had been further widened to include 134 sub-sectors of engineering sector. Government had also announced that the benefit of this scheme of 2% interest subvention could be available up to 31 March 2014
• Items covered under the Chapter 63 of ITC (HS) (other made up textile articles, sets, rags) and additional specified tariff lines of engineering sector items under the scheme have also been included in the scheme by widening its provisions

Widening the Scope of Utilization of Duty Credit Scrip

• Duty Credit Scrips issued under Focus Market Schemes, Focus Product Scheme and Vishesh Krishi Gramin Udyog Yojana (VKGUY) can be used for payment of service tax on procurement of services within the legal framework of service tax exemption notifications under the Finance Act, 1994. Holder of the scrip shall be entitled to avail drawback or CENVAT credit of the service tax debited in the scrips as per Department of Revenue rules.
• All duty credit scrips issued under Chapter 3 can be utilized for payment of application fee to DGFT for obtaining any authorization under Foreign Trade Policy. This benefit shall be available only to the original duty credit scrip holders. Duty credit scrip can also be paid for payment of composition fee and for payment of value shortfalls in EO under para 4.28 (b) of Hand Book of Procedure Vol. 1.

Market and Product Diversification

• Norway has been added under Focus Market Scheme and Venezuela has been added under Special Focus Market Scheme. The total number of countries under Focus Market Scheme and Special Focus Market Scheme becomes 125 and 50 respectively.
• Approximately, 126 new products have been added under Focus Product Scheme. These products include items from engineering, electronics, chemicals, pharmaceuticals and textiles sector.
• About 47 new products have been added under Market Linked Focus Product Scheme (MLFPS). These products are from engineering, auto components and textiles sector. 2 new countries i.e., Brunei and Yemen have been added as new markets under MLFPS.
• MLFPS is being extended from 01.04.2013 to 31.03.2014 for exports to USA and EU in respect of items falling in Chapter 61 and Chapter 62 of ITC (HS)
• Exports of High Tech products would be incentived and it would be separately notified by 30th June, 2013.
• The towns of Morbi (Gujarat) and Gurgaon (Haryana) have been added to the existing list of towns of export excellence for ceramic tiles and apparel exports respectively. These towns shall be eligible to get benefit under ASIDE Scheme.

Incremental Exports Incentivisation Scheme

• Government has announced Incremental Export Incentivisation Scheme on 26 December 2012 for the exports made during January 2013 to March 2013. This scheme is available for exports made to USA, EU and Asia. It has been agreed to extend this scheme for the year 2013-14. The calculation of the benefit shall be on annual basis under the extended scheme.
• The Government has also agreed to include additional countries under Incremental Exports Incentivisation Scheme. 53 countries of Latin America and Africa have been added with the objective to increase India’s share in these markets. The present exports to each of these markets are less than US $ 100 million.

Changes have been introduced in many other schemes and they are

• Facility to close cases of default in Export Obligation
• Served from India Scheme (SFIS)
• VKGUY Scheme
• Status Holder Incentive Scheme (SHIS)
• Re-credit of 4% SAD
• Duty Free Import Authorization Scheme (DFIA)
• Import of Cars
• Improvement in quality and timeliness of Foreign Trade Data
• Second Task Force on Transaction Cost in International Trade
• Electronic Data Interchange Initiatives
• Ease of Documentation and procedural simplification
• Widening of items eligible for import for Handloom/Made ups and Sports Goods

WTO Slashed Trade Growth Forecast for 2013 to 3.3 Percent

The World Trade Organization (WTO) on 10 April 2013 slashed the forecast of global trade by 1.2 percent to 3.3 percent from previous 4.5 percent. The WTO called up for strengthening the trade via multilateral system to ensure trade emerges as the engine of growth. WTO also informed that the trade growth of the world slowed to 2 percent in the year 2012 from the previous year 2011 rate of 5.2 percent. As per the details provided, the trade growth rate of the world is likely to remain low in 2013 as the economic slowdown of the European Countries was suppressing the global import.

Merchandise Trade: The forecast of merchandise trade for 2013 is 3.3 percent and this is below the average of 20 years from 1992 to 2012, i.e. 5.3 percent
Trade Forecast 2013: The WTO made a forecast of 2.1 percent growth in world output and it depends upon the sovereign debt crisis in Europe
In 2012 the World Growth Rate was measured to be 2 percent but have gone down from 5.2 percent that was recorded in 2011.

IMF Slashed World Growth Forecast to 3.3 percent for the Year 2013

International Monetary Fund (IMF) in its latest assessment of the global economy released on 16 April 2013 revised its world growth forecast for 2013 and slashed it to 3.3 percent from previous forecast of 3.5 percent predicted in January 2013. IMF revised its forecast because of the continued recession in the Eurozone. The IMF also forecasted that the economic growth will be on its pick by the second half of the year. The slow growth rate of the United States region is also a region behind the downgrade of the forecast. The Chief Economist of IMF, Olivier Blanchard warned that the fresh bailout of Cyprus and weakness of Italy could spark setbacks for the international economy. IMF in its assessment also expressed concerns over the global fragmentation of the dynamism of the emerging economies and the United States. Slow growth in countries like Russia, Brazil, China and India is also a reason for economic weakness. The global economy survived from the crash after defuse of the two largest short term threats to the recovery and they were disintegration of the eurozone and extreme budget cuts and tax hikes in United States. The U.S growth forecasted for the year 2013 is 1.9 percent and for Eurozone it is 0.3 percent. The measures adopted by the world to get out of the financial crisis have been failing due to the bad debt and weak capital hobbled by the banks. Due to Bank of Japan’s ambitious plan launched to reflate the economy, the IMF upped its forecast for the country to 1.6 percent from initial 1.2 percent.

Statement from World Economic Outlook Report of IMF

IMF in its WEO Report suggested that the Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy.

ITPO Signed a MoU with Government of India

India Trade Promotion Organisation (ITPO) signed a Memorandum of Understanding (MoU) with Government of India for the year 2013-14 on 20 March 2013. The MoU was signed between Rita Menon, Chairperson and Managing Director of ITPO and S R Rao, Secretary, Ministry of Commerce & Industry.

Highlights of the MoU

• The major highlight of the MoU is the projected surplus of Rs. 100 Crore by ITPO during 2013-14.
• The MoU laid down target for investment proposal to be submitted for the redevelopment of Pragati Maidan into a modern and state-of-the-art integrated Exhibition-cum-Convention Centre, to the Union Cabinet for approval.
• Certain other targets were also included in the MoU and these included 850 man-days of training to its both senior and other employees during 2013-14 and reduction of electricity water consumption by 5 percent and 10 percent respectively.

To Revive Interest in SEZs of Investors Government announced Changes in FTP

• The Annual Supplement 2013-14 to Foreign Trade Policy (FTP) 2009-14 was announced on 18 April 2013 by the Union Minister for Commerce, Industry and Textiles, Anand Sharma at Vigyan Bhawan, New Delhi.
• In the latest Annual Supplement 2013-14 the Union Government has tried to implement measures to revive the interest of the investors in Social Economic Zones (SEZs) as well as to boost exports.

Important features of the Package are

• The Government has reduced the size of total land area required for development of SEZs to its half from its initial requirement of minimum Land Area of 100 hectares for allowing the development of SEZs. Now an investor needs to have 50 hectares of land to develop a SEZ. This has been done in response to end the difficulties being faced by the investors in gaining collective large area of uncultivable land for setting up of the SEZ.
• Graded Scale for Minimum Land Criteria has been introduced to permit the SEZ an additional sector for each contiguous 50 hectare parcel of land. This has been done to ensure flexibility in utilization of the land tracts that falls between the 50 to 450 hectares.
• Flexibility is granted for setting-up additional units in a sector specific SEZ. This will be done by introducing sectoral broad-banding to encompass similar/related areas under the same sector.
• In context of Vacancy of Land: the government has revised the policy in existence that allowed a parcel of land with pre-existing structures but not in commercial use to be considered as a vacant land and this was used with the purpose of notifying it for a SEZ. The new policy being introduced is that pre-existing structures and activities being undertaken after notification would be eligible for duty benefits similar to any other activity in the SEZ.
• IT Exports constitute a very significant part of India’s exports and IT SEZs have a major contribution in it. Exports from IT SEZs during financial year 2012-13 have exceeded 1.40 lakh crore rupees and it registered a growth of over 70 percent, over the previous year’s exports. The Government has brought in new changes to boost growth in the IT SEZ sector and to encourage the employment opportunities in Tier-II and Tier-III cities.

Changes Implemented in IT Exports

• For development of IT SEZs, the Government has done away the criterion on minimum land area of 10 hectares, making it to no minimum land requirement for setting up an IT/ITES SEZ. The SEZ developers will have to meet up with the minimum built in area requirement.
• The criteria of requiring a minimum build-up land area has also been relaxed to a greater extent. The requirement of one lakh square meters is applicable in 7 major cities namely Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangalore, Pune and Kolkata. For the other Category B cities 50000 square meters and for remaining cities only 25000 square meters built up area norm will be applicable.
• The SEZ policy Framework in existence at present doesn’t include a policy of exit but now the Government permits, the transfer of ownership of SEZ units, including sale. The Government has also introduced several schemes and modified different policies as per the requirements.

4065.81 Crore Rupees for Water Pollution Control

The Union Government of India on 5 April 2013 sanctioned 4065.81 crore rupees for pollution abatement schemes of rivers and lakes in different states. Of all the states, Uttar Pradesh received 1385.95 crore rupees. The sanction cost of projects and expenditure includes the State Governments share under the National River Conservation Programme (NRCP) and the National Lake Conservation Programme (NLCP).

National Lake Conservation Plan (NLCP)

National Lake Conservation Plan (NLCP) started in June 2001 with a funding scheme of 70:30 fund sharing between centre and state. The main objective of the scheme is to restore and conserve the urban and semi-urban lakes of the country degraded due to waste water discharge into the lake and other unique freshwater eco systems, through an integrated ecosystem approach.