Exporters seek three-month transition time for new FTP

New Delhi: Indian exporters have sought a transition period of at least three months for the new foreign trade policy, arguing this will allow them to settle their existing contracts under the previous policy.

The government on Friday released the new foreign trade policy (FTP) after extending the previous five-year policy for 2015-2020 as many as four times amid pandemic-induced restrictions and subsequent global uncertainty. The last extension was granted in September 2022 until 31 March 2023.

“We need the old foreign trade policy to continue for at least three to four months so that existing contracts can be executed factoring the prevailing benefits. It is a problem for us,” Federation of Indian Export Organisations (FIEO) president A Sakthivel said.

“FIEO has requested the government that a 3-6 months’ transition period may be provided, whenever a major change is notified in the Foreign Trade Policy,” he added.

As per an official document, the new FTP incorporating provisions relating to export and import of goods and services, “shall come into force with effect from 1 April 2023”, and shall continue to be in operation unless otherwise specified or amended.

“All exports and imports made up to 31 March 2023 shall, accordingly, be governed by the relevant FTP, unless otherwise specified,” the government stated.

Generally, it takes three to six months for the execution of a contract, explained Ajay Sahai, director general and chief executive of FIEO.

“Existing orders should not be affected and because the new policy has no end date, there is a bit of apprehension. So, we have asked for a transition period. Generally, it takes three to six months for execution of current contracts and tomorrow, if it is withdrawn, it could pose problems,” Sahai explained.

Breaking from convention, the government launched the trade policy without an end date, keeping room for revisions to better respond to heightened global economic volatility that has dragged down global growth estimates.

However, Sahai added that the new policy may give better incentives.

Notably, the new foreign trade policy has addressed the problems faced by exporters while dealing with sanctioned countries such as Iran. This comes after exporters, especially of tea, were unable to make up for a shortfall in Sri Lankan tea supplies to Iran following the economic crisis in the island nation.

“Export proceeds realized in Indian rupees against exports to Iran are permitted to avail exports benefits/incentives/fulfilment of export obligations under the FTP, at par with export proceeds realized in freely convertible currency,” the new FTP stated.

The vostro account set up for the purpose of trade had run dry after India was stopped from sourcing oil from Iran because of US sanctions.

On the new FTP, Sanjay Budhia, chairman, CII National Committee on Exports and Imports said: “Reduction of the export performance threshold in the new FTP is a welcome step, as this will enable more exporters to achieve higher status and reduce transaction costs for exports.

The policy has a strong emphasis on reduction of transaction costs, e-initiatives, MSMEs, internationalization of INR and e-Commerce exports which could be a game changer to put India at a leadership position in the global exports map,” Budhia added.