The Narendra Modi government may drop its plan to come out with a new foreign trade policy (FTP), which has been delayed due to sharp differences between the finance and the commerce ministries over tax incentives, during this fiscal.
A senior finance ministry official told Mail Today that the government is "double minded over the issue and may decide to continue with the existing policy for now and introduce the new policy from April 2015 onwards". "In any case, only four months are now left in the current financial," he added.
Commerce and industry minister Nirmala Sitharman had said in September that the new five-year FTP for 2014-2019 would be "different" from the previous ones and hopefully announced soon. Earlier, the government had planned to introduce a new FTP immediately after the Budget in July. It was later scheduled for the middle of August and subsequently pushed to October-end.
According to sources, discussions are still on between the finance and commerce ministries over tax concessions required to boost exports, especially in the special export zones (SEZs), which have been fading out.
The finance ministry has said that the contraction in exports has not taken place merely because of the minimum alternate tax (MAT) on SEZs or the dividend distribution tax on export units, but also due to the global recession. MAT was imposed on SEZs because they were not reporting revenue correctly. There were also cases of export units selling goods in the domestic market and passing these off as exports to claim incentives, which led to revenue leakage.
Federation of Indian Export Organisations director general Ajay Sahai said, "At present, the old policy is in place until further orders, which has created an uncertain environment as exporters are not sure about exact incentives they would get for new orders that are being placed. Exports need a stable policy regime for the next couple of months; so, either the government should come immediately with a new policy or else leave it for the next financial year."