The Dollar Business Intelligence Unit | July 2016 Issue | The Dollar Business
The idea of export promotion is possibly as old as trade itself. Even in the ancient world, when merchants and traders brought back gold and exotic fares from far off lands in exchange of goods, emperors and monarchs accorded them a royal welcome and rewarded them with riches. Come today and the tradition has only grown stronger in a globalised economy where exports have become essential to economic growth of most countries. In fact, Japan, South Korea, Germany, and more recently China, have built their economy around exports and have done so with great success.
India, though a late starter when it comes to policy-driven exports, began export promotion activities through export promotion councils (EPCs) as early as the 1950s, with EPCs like Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) being established in 1954 and Plastics Export Promotion Council (popularly known as) being set up in 1955. But despite this 60 year old track record and 37 EPCs, Commodity Boards and Export Development Authorities (Export Promotion Organizations) as of date, there are questions whether they have been able to fulfill their mandate.
The basic objective of an EPC is simple – to promote exports from the country. Each Council is responsible for the promotion of a particular group of products, projects and services. One of the main roles of an EPC is also to project India’s image overseas as a reliable supplier of high quality goods and services. EPCs are also mandated to encourage and monitor the observance of international standards and specifications by exporters, as well as keep them abreast of the trends and opportunities in international markets for goods and services.
Elephant in the room
That being the objective and functional area of EPCs, their effectiveness has been questioned over the years. As expected, believers exist in two camps. Recent months have however seen more question marks being flung at them. Bad to worse has been how matters have naturally progressed on India's foreign trade front. Declining exports from the country and rejection of export consignments have got Indian exporters across industries feeling the biting, bitter chill global headwinds. And inabilities of traditional sectors to expand their export baskets (to fulfil demands of the global market) and maintain competitive pricing have further set the alarm bells ringing for India's exporters.
Not to forget that exporters have other complaints. Bureaucracy, challenges in documentation and logistics, difficulties in realising incentives from the government on time, other nations putting an embargo on India's produce without much proof, are some. And they expect the EPCs to stand by them and solve the riddles whenever they appear. 
So the big question here is – have EPCs lived up to the trust of their members? Have they achieved their objectives? Simply put – are they really playing their due parts?
What is more interesting is that a significant number of exporters, whom The Dollar Business spoke to, have not even felt a genuine need to become a member of any EPC. They feel that a membership as such is either a mere policy compulsion, or becomes important for those exporters with a diversified basket. [Any firm or exporter who wants to apply for an authorisation to import or export or avail any other benefit or concession under FTP is required to furnish a valid 'Registration Cum Membership Certificate' (RCMC), which can only be issued by Export Promotion Councils, Commodity Boards or Development Authorities or some other competent authority as prescribed in FTP].
So what's their line of reasoning? Lack of timely, and adequate, support from export promotion bodies. On the face of it, that may even sound logical. But the bigger question is – are EPCs to blame in the first place, or is it India's very policy framework that deserves credit for this not so encouraging perception of several exporters about agencies created for their very own welfare?
Any firm or exporter who wants to apply for an authorisation to import or
export or avail any other benefit or concession under FTP is required to
furnish a valid 'Registration Cum Membership Certificate' (RCMC), which
can only be issued by EPCs, Commodity Boards or Development Authorities
or some other competent authority as prescribed in FTP
Where’s The Money?
EPCs are mostly funded by their members, except for grants for exhibitions and trade fairs where the funding comes from the Centre or the sponsoring state government. “None of the EPCs get any funding for managing its administrative set-up. For FIEO, we have more than 22,000 members who provide the bulk of the funding. We do organise events for some other organisations and programmes, such as Make in India, where support is routed through the Centre and state governments. Though each council has its own mechanism to collect funds, most funding comes from the members,” says Ajay Sahai, Director General & CEO of Federation of Indian Export Organisations (FIEO), the largest EPC in India.
Ashok G. Rajani, Chairman of Apparel Export Promotion Council (AEPC), shares similar thoughts. “AEPC has never sought government grants to run the Council. However, some of the trade fairs and exports promotion activities are through grants under Marketing Development Assistance (MDA) or Marketing Access Initiative (MAI) schemes. But the Council runs on membership fees and some other internal sources of funds," he tells The Dollar Business. If this is the case, it would be completely wrong to expect EPCs to splurge on export promotion.
Let us look at how the numbers stack up for FIEO, the largest of them all; with an average annual membership fee of Rs.6,250 and assuming a total active membership base of about 22,000, the annual revenue of FIEO should be an approximate Rs.13.75 crore. While FIEO does not complain about the lack of funds, with some 17 offices to run and a number of seminars, several conferences and trade fairs to organise across the nation to guide its members, it is but obvious that FIEO cannot be comfortable with funds. And that's the case with almost all other EPCs.
While some EPCs have slightly higher membership fees (which for an individual member can be about Rs.20,000), it is highly unlikely that any EPC can boast of annual revenues from membership figures in excess of Rs.15 crore. No wonder then that some exporters talk about extremely low turnouts of foreign buyers when EPCs hold buyer-seller meets.
Some also claim that at times, EPCs are unable to conduct even something as basic as an adequate foreign market research and, hence some trade fairs abroad, despite the best efforts of EPCs are unable to garner the right kind of target audience. 
So, there have been some amusing situations where a buyer-seller meet has been conducted in a foreign land just following a large-scale 'Make in India Week'. Naturally, the majority of participants who attended the previous event failed to make it for the buyer-seller meet; such a situation as this points to a lack of coordination between the concerned promotion bodies and the Ministry of Commerce.
On the other hand there are exporters, who have to sign up as members of a number of EPCs to get benefits arising from exports, because of their diverse baskets. “There are entrepreneurs who export multiple products and they need to be registered with quite a number of EPCs. However, exporters should not be forced to become members of multiple councils," says P. C. Nambiar, Chairman, Export Promotion Council for EOUs and SEZs (EPCES). He believes, in order to change the scenario in favour of exporters and to ensure a smoother flow of authentic trade information between the trade promotion body and the industry, the mandate of EPCs needs to be upgraded. This will enable the government and EPCs to formulate an up-to-date policy, which in turn will help boost exports from India.
EPCs have been actively organising exhibitions and buyer-seller meets
in India and overseas. But are these initiatives boosting exports?
Inclusive Growth
When The Dollar Business spoke to EPCs about participation of MSMEs in their organisations, most pointed out that a large number of MSMEs were already members and benefitting from their activities. On the other hand, most also agreed that more can be done to increase participation of SMEs in EPCs' activities. “A large number of our active member-exporters are small scale enterprises and they participate in our overseas events under MAI and MDA schemes. They are in fact the ones who are most active in seminars organised by the Council. Though there is good awareness of Chemexcil’s activities amongst the MSME sector, the Council still needs to make efforts to enroll more MSMEs,” says B. R. Gaikwad, Chairman, Chemexcil to The Dollar Business.
With a large portion of our exports coming from MSMEs, it is but natural that a drive to enroll more members from the community in the respective sectoral EPCs is the need of the hour. The fact though remains that while some MSMEs are unaware about the benefits of membership, others remain ignorant about the presence of these EPCs in their geography or find them inaccessible due to lack of proper communication infrastructure.
The other issue that hinders membership of smaller traders is the benefit of membership weighed against the cost involved. “We are now seriously looking at the idea of joining that EPC that promotes our products [APEDA]. So far, we have been able to do business on our own, largely owing to our personal contacts and relationships. By joining an EPC, though we will be able to get latest insights on our export markets, it will all come at a cost. Hence, currently, we are taking feedback from some existing EPC members and will accordingly decide,” says Anshu Dhaka, Director, Kanakdhara Group, a herb exporter based out of Jaipur in Rajasthan.
While EPCs are looking for ways to increase their membership numbers, becoming a member exporter is also not a piece of cake. AEPC, for example, needs that the aggregate exports of the firm or company, which is applying for membership, should be more than Rs.1 crore in one of the previous three financial years.
You may ask, "Is this a fair standard of labelling?" This eligibility criterion seems to indicate that while structuring regulations, some EPCs have made a deliberate effort to overlook the micro and small enterprises, which by very nature of their investments, would be hard-pressed to achieve an export value of Rs.1 crore, without any support from EPCs or the government!
Also in these fast moving times, when identifying an opportunity and grabbing it with speed is the hallmark of an entrepreneur, why should an entrepreneur be forced to furnish financial statements of the last three years to get the benefit of full membership? It may be inadvertent or a matter of legacy, but it may be high time for membership norms at EPCs to be given a good renovation – for the benefit of both EPCs and exporters.
Lay the blame on...
Exporters, especially those who are members of EPCs, are almost unanimous in saying that the entire blame of declining exports cannot be laid on EPCs. “The objective of an EPC is to promote exports, but unfortunately the results are yet to be seen. In terms of efforts and initiatives, EPCs get full marks. But if people aren’t buying, and if there is a recession, there is not much that an EPC can do. EPCs are doing their utmost best on getting us subsidised rates, and exposure to international markets,” says Arvind Mahendru, Partner, Quero India Fashions Ltd., a leather exporter based out of Gurgaon in Haryana.
Similar thoughts are echoed by Chirag Shah, Managing Director, Genex Pharma. He opines, “Our relationship with our EPC has been really good. There have been some global issues such as devaluation of currencies, commodity shocks, etc., but there aren't under the control of any EPC. Right? Getting certifications has been a smooth process and they have been regularly organising informative programmes.”
...Despite truth being
That the global economy has been in doldrums for the last year-and-a-half, and most export-oriented economies – whether they trade in commodities or in intermediaries – have witnessed a slowdown, is what defines the present and perhaps the immediate tomorrow of global trade. And you really cannot expect India's EPC – whether individually or together – to impact global sentiments that will result in their members celebrating a bigger today than yesterday in the short term.
And mind you, CY2016 will perhaps be worse than CY2015 for India's exporters. Even The World Bank on June 7, 2016 further lowered its global growth forecast for CY2016 to 2.4% from its earlier forecast of 2.9% in January this year. What's more? Germany, the poster boy of Europe and the world's third largest exporter, expects a sluggish export growth in CY2016 – exports from Germany have already gone down to $1,331 billion in CY2015 from $1,498 billion in CY2014 (a $167 billion fall!).
Further, Britain’s exit from the 28-nation bloc and political uncertainties with respect to impending regime changes in US, France, Netherlands, UK, etc., have further dampened the global trade sentiment.
With few countries growing at a robust pace, and with India in the limelight at 7.6%, trade promotion bodies across the globe are doing their best to woo importers and find buyers for their products.
China, an economy that revolves around exports and whose government itself is the largest export promotion body in the world, has been too experiencing a low BP situation.
In fact, China’s exports in May 2016 declined by 4.1% as compared to the same period in 2015. And experts believe the trend is likely to continue over the next two quarters. South Korea, another major exporter from Asia, saw its exports decline for the 17th straight month in May 2016 (6% y-o-y in May). Japan, a country known for its export prowess has also been suffering a similar present with its exports in May 2016 declining 11.3% y-o-y – Japan's worst decline exports in the last four months!
Wherever you look, exports are in trouble. Well, almost wherever. But despite the gloomy outlook, there is hope. US seems to have stabilised and analysts are hopeful Europe too will be able to improve its growth rate. With China going all out to revive its days of glory, and commodity prices showing a semblance of stability, there is hope that though we may not soon see exports booming, the decline may have bottomed out. Similar sentiments were shared by Nirmala Sitharaman, India's Commerce and Industry Minister at a press conference on June 17, 2016. “The bottoming out has happened. From now, it will be a slow recovery and a steady pick-up,” she said. It's worth mentioning that India's merchandise exports in May contracted at its slowest in 18 months – 0.79% – indicating that the fall in exports, may have finally been arrested. Mind you, may.
What the EPCs feel
While every sector has its specific issues when it comes to exports, some prevail across sectors. One challenge seems to be the lack of branding by Indian exporters. According to Sahai of FIEO, “One of the reasons why Indian exports have taken a hit is because we cater to a very price-sensitive segment. If Indian currency appreciates against a competing currency, then we are out-priced in the market. And since most of our exports are unbranded, they can be easily replaced by products of Cambodia, China or Vietnam. Remember, branded items cannot be replaced.” The challenge though is that branding abroad is an expensive exercise and a large number of small and medium enterprises do not have the wherewithal to promote their brand. Financial assistance from the government in branding therefore will be a welcome move. But there are complications as to how the Centre can or may plan such an initiative. And two of the biggest challenges in this case will be: just allocation to EPCs for their members, and corruption during allocation and execution.
Cost of logistics and transportation is another challenge that was mentioned on numerous occasions by both EPC bosses and exporters to The Dollar Business. Both EPCs and exporters believe that high cost of logistics is a factor that makes our products uncompetitive in global markets. According to a McKinsey & Co. report titled, Building India: Transforming the nation's logistics infrastructure, India spends 13% of GDP on logistics, which is a lot more than what US (9.5%) and Germany (8%) spend.
But despite this, rail and coastal shipping costs in India are 70% higher than in US, and road costs are higher by 30%. These results in lower competitiveness of Indian exports in overseas markets. However, in the past couple of years, the new government seems to have began work on improving the fractured infrastructure that for a long time had made living unviable for India's exporters. The Centre is investing significant amounts in both roads and port infrastructure, including coastal shipping, and we hope the results will be visible soon.
Another problem quoted by EPC heads to The Dollar Business is lack of adequate incentives and remissions to exporters; and this as per them is perhaps the most important factor hampering exports from India. For instance, in chemicals sector, for a large number of products, reward under MEIS has been reduced to 2% from 5% which has affected exports of these products. The same holds true for the telecom sector as R. K. Bhatnagar, Director General of Telecom Equipment and Services Export Promotion Council believes. "Export incentives currently available are highly inadequate," says he. “The present policy with regards to telecom equipment encourages imports, and much-needed incentives for exports are lacking." As a matter of fact, in the current times, major telecom service providers like Airtel, Vodafone and Idea Cellular import most of their mobile networking equipment with very limited procurement from indigenous sources. "If the existing trend continues then by 2020 India's outflow of foreign exchange in the ICT segment is going to be higher than that of petroleum sector, though government’s vision has been to balance exports with imports in the electronics sector,” adds Bhatnagar.
It's not that EPCs are not lobbying hard for their sectors, but trade experts feel that unless tax reforms, including GST, are taken up and inverted duty structure remain unaddressed, India's exporters will continue to miss the bus and the export promotion heads will only be left scouting for newer options without having been given adequate funds or opportunities to implement solutions that could play medicine to slowing exports in the respective industries.
Change we need
Having said that, it's also true that EPCs have not been sitting idle in the face of declining exports from the country. Top brass across EPCs are aware of the many challenges that exporters are facing in today's dynamic world and as such, have proactively enhanced their export promotion activities. Certainly trade promotion and arranging buyer-seller meets in India and abroad remain a key activity, but they are also involved in helping exporters gain market intelligence and smoothening the documentation procedure for availing incentives from the government. As M. Rafeeque Ahmad, Chairman, Council for Leather Exports (CLE) asserts, “Today an EPC's activities are not only confined to its core area of marketing and export promotion. EPCs have diversified a lot in recent years. They have ventured into areas like infrastructure development, skill development, international collaboration, design development, domestic market development, etc., to name a few. Besides, they are also actively coordinating with the government for better implementation of its flagship programmes like Make in India, Skill India, Digital India, etc.”
EPCs can certainly play an important role in the development a country's international trade, especially of developing countries that seek to make exports an engine for economic growth. But then, they need adequate support and funding from the government. Though market forces determine the flow of trade, export promotion can definitely be used as tool to influence that flow. No doubt, the Foreign Trade Policy 2015-20 has introduced several measures for facilitating trade and improving ease of doing business by reducing the number of mandatory documents required for export, but then it's time the government also looks at incentivising our exporters to further empower our EPCs.
EPCs definitely can play a much bigger role in broadening India's export base and increasing the country's market share across targeted high-growth markets, while sustaining it in traditional markets.
It's high time policymakers revisit our nation's export promotion strategy, and accordingly reinvigorate EPCs' mandate, to get maximum out of today's dynamic world and augment Indian exports.
A noteworthy fact about EPCs surfaced during The Dollar Business' investigations for this story. And that is the remarkable transparency in the operations of India's EPCs. Given their willingness to entertain every question shot at them and participate in every query, speaks volumes of how sincerely they believe they can become the change agents that define the tomorrow of India's foreign trade. The government has to give them that chance. And we know, to give India's EPCs to give their exporter-members a shot at conquering the world of foreign trade, this is a genuine ask.
Ashok G. Rajani, Chairman, Apparel Export Promotion Council (AEPC)
TDB: AEPC was incorporated in 1978. Do you think there is a need to review its mandate?
Ashok G. Rajani(AGR): Absolutely. In fact, we need to reposition all export promotion councils (EPCs) and review their mandates because export promotion today cannot operate in isolation – considering the dynamics in the domestic market on one hand and the implications of non-trade issues and trends in the international markets on the other.
If we look at the present scenario in the apparel sector, only one-third of the total produce is exported. The bigger market for producers is domestic. And, not to say, most players are doing both – catering to the domestic market as well as exporting. So, if one has to look at competitiveness enhancement strategies, it should be for boosting exports. In exports, one can have aspirations and go overboard as there are premiums whereas for domestic market the considerations are not same. We need to have a fine-tuned policy which is feasible, yet is a good benchmark for an export-oriented unit. By stating this, I mean productivity benchmark and social compliance benchmark, because as of now, the requirements are very different in domestic and export markets.
Of course, some activities need to be done on an urgent basis. For example, the need to improve the speed of delivery in the supply chain. Ours is a very cost intensive sector. If it was automobile or pharmaceutical sector where margins are high, one could have had high aspirations, but we have to rationalise our choice between cost effectiveness and high aspirations.
TDB: What challenges do you face while promoting exports?
AGR: The biggest challenge we face is in maintaining the competitiveness of exports of products which the EPC is representing. That is a variable of the relative competitiveness and competency of our rival countries. In case of apparel, most of the developing countries are important players and the sector is very important for them. The way their policies are being handled and the kind of support they are giving is a huge determinant in our relative positioning. But many times, we have no control over it. And since the characteristics of Indian economy are different from most of its rivals in the sector, there is no easy replication model available for us. A case in point could be Bangladesh – we cannot think of replicating the way their industry has grown, and as such, we can’t go for a competitive wage policy. We will have to have our own set of policies based on the nuances of our economy.
TDB: What are the challenges faced by the apparel sector?
AGR: Other than labour and policy related challenges, procedural delays are also a cause of concern to us. Of late, the country has been trying to work on this by increasing the ease of doing business, but we need to speed up efforts on this front.
Infrastructural problems are also hurting our businesses. Time taken from factory to dock and from dock to the destination is still very long as compared to that in other countries.
TDB: What does AEPC do to help the exporters?
AEPC: AEPC is involved in many activities related to the sector. Prominent among them include export promotion, skill development, training and strategy planning for providing a thrust to the sector. Besides these, under the ‘Garment Product Development & Export Promotion’, the Council has identified six products wherein the exports from India are very low compared to the world's exports in these product lines.
We are also conducting workshops on utilising and improving market access with FTA countries, and are planning workshops in clusters to understand the existing status. We are also organising many seminars on the potential for doing business in Latin America, Africa and Russia.
TDB: Are you happy with the export incentives currently provided to your industry? How do you see the existing duty structure and tax deductions available to the textile sector?
AGR: We are very happy with the revised MEIS reward rates and MEIS scheme. However, as of now, we are focussing on fast-tracking the FTA with EU, which is the most relevant market access tool at the moment.
We are happy with the relaxation given for import of specialised fabrics. However, we have requested for further liberalisation and also widening the list of fabrics that can be imported. Also, we have asked for duty drawback on apparels made from imported fabrics.
With regard to the tax deduction available to the sector, we look forward to more favourable tax exemptions to be on a level-playing field with countries like China, Bangladesh, and Vietnam, where better mechanisms for VAT refunds, tax holidays for new set-ups and employment tax rebates are available.
TDB: Do you think brand India is being promoted as a reliable source of goods across world market? What kind of financial support do you expect from the government?
AGR: We are happy that the present government has been focusing on brand India. However, not much work has happened on branding and developing some indigenous brands. We have been asking for support for R&D in sampling and product development, and for encouraging scaling-up.
B. R. Gaikwad, Chairman, CHEMEXCIL
TDB: Chemexcil, which was set up in 1963, has grown to become a 4,000-member strong organisation? How has the role of Chemexcil, or EPCs as a whole, changed over the years?
B. R. Gaikwad (BRG): With change in international dynamics and the challenging scenario, the entire eco-system has to change. Likewise, EPCs also have to change in order to cope with the expectations of industry, the government and the changed global needs. It is important that EPCs also align their export promotion efforts with that of other countries.
TDB: As an EPC what are the challenges that you face while promoting exports?
BRG: It is essential to have adequate and trained human resources to meet the expectations of the stakeholders. Besides, as an intermediary our success lies in providing an enabling framework to the industry to thrive and also provide them a proper platform in international exhibitions. In such a scenario it is essential to improve the service levels and engagement with our members.
TDB: What are the key challenges faced by the Indian chemical industry?
BRG: Apart from the environmental moratorium which limits flexibility in production capacity and product mix, there are several other external and internal factors which are acting as impediments such as an inverted duty structure, lack of level playing field to EOUs for their DTA sales with that of imports from FTA countries, reduction in incentives under chapter 3, withdrawal of GSP benefit by EU making our products non-competitive, trade remedy measures against Indian exports in Brazil and China, etc. Besides, India is facing intense competition from Chinese exporters as they are enjoying much higher incentives in their country and are more competitive. ASEAN FTA has put Indian manufacturers to a serious disadvantage which our government is unable to correct. In addition to this, after entering into an FTA, some of the ASEAN countries have put export taxes on export of raw materials and semi-finished goods giving a competitive advantage to their own manufacturers who are reaping the benefits of lower duties provided by FTA. Unfortunately, the Indian government so far, has failed to address this issue of the industry.
TDB: What is Chemexcil doing to help Indian exporters?
BRG: Under the brand “CAPINDIA”, Chemexcil along with other three EPCs – Plexconcil, Capexil and Shefexil – recently organised a big international exhibition in India which not only helped members to demonstrate their manufacturing competence to global customers, but also helped them to network with cross functional global buyers. This event also had a reverse buyer-seller meet to promote direct exports. We are now planning to make this an annual event. We are also offering support to exporters to help them understand statutory compliance in export destinations, such as REACH – a regulation of European Union, by organising capacity building initiatives and seminars on topics such as FTAs, handling of dangerous goods and their transportation, etc.
TDB: Is the present incentive scheme enough to encourage exporters? What about duty structure in your sector?
BRG: After merger of various Chapter 3 schemes, export incentives on many of our chemicals products stand reduced from 5% to as low as 2%. For the majority of chemicals under Chemexcil’s purview, MEIS is just 2% which has further impacted the competitiveness of the exporters. MEIS incentive helps exporters to overcome economic disadvantage faced by them due to poor infrastructure and higher export costs. With its reductions, exporters now are at a disadvantage in the global market. Many countries give protection to their exporters of value-added products by way of levying export taxes and other levies on raw materials. India has not been able to find any such innovative approach to countering these incentives.
It is important that the government takes urgent steps to remove the inverted duty structure, review FTA duty structures to protect domestic manufacturers with surplus capacities and amend duty structure for DTA sales by EOUs/SEZs to provide them a level-playing field with imports from FTA countries. Our Council has given timely suggestions and inputs on this matter. However, its redressal is taking a lot of time and further delays might hurt domestic manufacturing.
Keeping in mind our past experience with FTAs, the government should be very cautious in giving tariff concessions to competing countries such as China, South Korea, Malaysia, Indonesia etc as we are having negative bilateral trade with them.
TDB: Have EPCs, with the help of the government, been able to establish India as a source of reliable products?
BRG:With the initiative of our Prime Minister for Make in India, brand image of the country has certainly changed to a quality supplier at a competitive price. Recently the government has tightened the guidelines for MDA, MAI schemes. Though we agree with the intention of infusing a sense of accountability in utilising assistance, care needs to be taken to introduce the new guidelines after putting in in-depth thought so that the changes are not a hindrance for export promotion.
Rakesh K. Bhatnagar, DG, Telecom Equipment & Services Export Promotion Council (TEPC)
TDB: Do you believe it is time to change or enhance the mandate of export promotion councils (EPCs)?
Rakesh Kumar Bhatnagar (RKB): We believe, the primary objective of export promotion councils is to develop and promote exports from the country. EPCs project India’s image abroad as a reliable supplier of high-quality goods and services. EPCs should keep abreast of the trends and opportunities in international markets for goods and services and assist their members in taking advantage of such opportunities in order to expand and diversify exports. Some basic issues relevant to EPCs are required to be reiterated and they are as relevant as they were a few years back.
TDB: We have huge imports in your sector. Why?
RKB: We believe, the present policy with regards to telecom equipment encourages imports, and in that, much-needed incentives for exports are lacking. In the telecom sector for example, major service providers import most of their mobile networking equipment with very limited procurement from domestic manufacturers and suppliers. If the existing trend continues then by 2020 India's outflow of foreign exchange in the ICT segment is going to be higher than that of petroleum sector, though government’s vision has been to balance exports with imports in the electronics sector.
TEPC is providing its inputs on possible methodology to address these challenges. The intent of the government should be to promote, procure and support India-manufactured goods. Any policy made in this direction should not be allowed to be twisted, denied or put into a spin by interested foreign lobbies to render the policy ineffective. Exports are declining and imports are on the increase. These are pointers that the industry wants the government to listen to and support them through their promised incentives for ‘Design in India’, and ‘Make in India’. Export prospects can improve if additional incentives and certain policy changes are carried out. In sum, if corrective steps are not taken in time, ‘Digital India’ dreams will get delayed and our exports will not be able to catch up with our imports.
TDB: What about the present duty structure?
RKB: Export incentives currently available are highly inadequate. Further, most of the items are being imported at zero duty. These products are also produced by Indian manufacturers but the added cost of excise, service and other taxes make them uncompetitive against Chinese products. The industry does not have access to soft loans at a time when competing foreign companies are able to offer delayed payments in installments over a long period of time. Preferential market access policy for select items is available only for government procurement. Tax holidays, concessions on existing duties, and R&D funding is the need of the hour for the telecom industry.
TDB: What steps have been taken by TEPC to help exporters?
RKB: TEPC organises various events to showcase Indian capabilities. Indo-Africa ICT Expo in Kenya is one such event where TEPC takes Indian telecom equipment & services players along with software industry leaders to Kenya to sell their products in emerging markets of Africa. TEPC organised it in September 2015 for the first time. Now it is being organised again in September 2016. Further, in a recent buyer-seller meet, which was organised in New Delhi, TEPC invited over 80 buyers from 27 countries to India and arranged their interactions with Indian telecom players. Going forward, TEPC is now planning a buyer-seller meet in Bangalore in August 2016 and in February 2017 in Delhi. TEPC also participates in exhibitions like Gitex in Dubai, CommunicAsia in Singapore, AfricaCom in Cape Town, and Nigeria Com in Nigeria. TEPC foresees multifold increase in exports in the next five years, provided incentives and support are given, including preferential market access to indigenous manufacturers who are starting from the designing stage in the country. Domestic mobile phone manufacturers like Micromax, Lava, Intex, Videocon and MNCs like Samsung have started manufacturing mobile phones within the country. Other global vendors like Foxconn, Apple, and Lenovo have also announced their plans to manufacture mobile phones in India. However, these will be 'manufactured' in India, and not 'designed' in India. We are trying to ensure that the Indian industry adopts a ‘consortium’ approach in bidding for infrastructure projects in developing nations while tapping announced Indian government’s aid proposals.
TDB: Do you think brand India is being promoted as a reliable source of goods across world markets?
RKB: India now has an international standardisation body Telecommunications Standards Development Society, India (TSDSI) that is working on 5G and M2M standards based on the requirements in India. Existing Indian standards could lead to Indian designs by R&D units like The Centre for Development of Telematics (C-DoT) and Telecom Centres of Excellence (TCOEs). Indian designs could be adopted by multiple manufacturers in the country. This will lead to better Indian standards, Indian designs and India-manufactured equipment. And since no royalty payments are involved, it can help India emerge as a reliable source of goods across the globe.
M. Rafeeque Ahmed, Chairman, Council for Leather Exports (CLE)
TDB: In the changing global landscape, do you think there is a need to review and reinvigorate EPCs' mandates so they can deal with changing business realities more effectively?
M. Rafeeque Ahmed (MAR): Today, Council for Leather Exports (CLE) has moved beyond activities confined to its core area of marketing and export promotion. It has ventured into areas like infrastructure development, skill development, international collaboration, design development, domestic market development, etc., to name a few. Besides, CLE is also actively co-ordinating with the government in implementing its flagship programmes like Indian Leather Development Programme (ILDP) and Make in India, etc. CLE’s mandate is in tune with the new realities and opportunities of the industry.
TDB: How happy are you with the government's initiatives to promote Indian leather industry?
MAR: The government has taken a lot of efforts for the sustainable development of leather industry in the country. In fact, the transformation of the leather industry from a mere exporter of raw hides and skins in the 1950s and 1960s to a leading value added products exporter, can be attributed to the continuous short and long term programmes of the government.
The government has included the leather industry as a Focus Sector in its Make in India programme. The Indian Leather Development Programme (ILDP), being implemented in the 12th plan, has also helped in capacity modernisation and expansion. As regards to additional support measures for the leather sector is concerned, we have presented a development plan to the Department of Industrial Policy and Promotion recently, wherein we have sought support measures for branding, construction of workmen dormitories, removal of ceiling of Rs.2 crore grant under Integrated Development of Leather Sector (IDLS), inclusion of 'Land plus Building' cost under IDLS Scheme, nod for import of second-hand machinery under IDLS and EPCG Schemes, implementation of Technology Mission with components namely, systemic and large collection of raw hides and skins, technologies for capacity utilisation of tanneries, up-gradation of CETPs (common effluent treatment plants) with latest technologies and developing a framework for quality benchmarking and certification, etc. Further, we have also requested the government to enhance the support measure under MEIS from the existing 3% to 5%.
TDB: As an EPC, what is your biggest challenge?
MAR: Generally, the biggest challenge for an EPC is penetrating new and potential markets. Today, EU and US together account for about 68% of exports of Indian leather industry. Of course, we have succeeded in our market diversification efforts to some extent, with penetration in markets like Russia, Japan, Canada, Australia, Korea, UAE, Saudi Arabia, South Africa, etc. But still our share in these markets is less than 2%. CLE has been organising marketing events in most of these potential markets and the efforts will show results in the long run.
TDB: Is brand India a force to reckon with in your sector?
MAR: The image of Indian leather industry as a reliable source of high-quality goods has definitely been promoted in major and potential markets, through sustained marketing programmes initiated by CLE. In recent times, we organised Make in India investment promotion shows in Germany, Brazil, USA, China and Italy, highlighting investment opportunities in the Indian leather sector. The government is supporting these initiatives through financial assistance provided under Marketing Development Assistance (MDA) and Market Access Initiative (MAIS) schemes. We have requested the government to provide some relaxation in these schemes like relaxing the conditions of 10 minimum participants under MDA and 40 under MAIS and instead fix minimum of 5 members for MDA events and minimum 20 members for MAI events, to enable us to organise promotional events in potential markets, as it is difficult to get large-scale participation of exporters in these markets.
TDB: What are the measures taken to ensure that the goods exported by your members are of the standards accepted by the global markets?
MAR: The Indian exporters are already adhering to various statutory requirements of international markets. These include the REACH regulation of EU (which restricts usage of certain chemicals in products), Consumer Safety Product Improvement Act (CPSIA) of USA which prescribes presence of lead in children products, etc. Besides, tanneries are also going in for LWG (Leather Working Group) audit.
TDB: Is there enough awareness about Leather Council amongst the MSME community that accounts for a large portion of our exports?
MAR: About 60% of members registered with CLE are from the MSME segment. This alone is a clear proof that most MSME exporters in the country are registered as members with CLE. Also, MSME segment accounts for about 75% of exports from Indian leather industry. MSME exporters are availing various support measures of the government, including the MDA and MAIS being implemented through CLE.
TDB: Is CLE pitching for any free trade agreement (FTA)with any country or region?
MAR: From the leather sector’s point of view, I must admit that India still does not have FTAs with the two largest global markets namely European Union and USA. However, we all must appreciate the fact that the Indian leather industry has been able to substantially engage in market diversification efforts on account of the trade agreements of India with countries like Japan, Korea, Chile, ASEAN, etc. Japan has still placed most of the footwear at a high duty range and we must negotiate for zero duty access for leather goods and footwear in Japan under reciprocal duty concessions by India. Similarly, under Indo-Korea CEPA, Korea is offering 'duty-free' facility or 'concessional duty' facility for certain leather products. The interesting aspect is that we have been able to penetrate a market like China too to some extent. China is offering import duty concessions to India for certain finished leather, leather goods and footwear under APTA. Besides, India’s export of leather, leather products and footwear to ASEAN countries has also increased. However, factors like absence of direct shipping lines, relatively poor road and port infrastructure etc., are affecting our price competitiveness. Having said this, we must also look at the rapid changes that are taking place in the global trade today. The Trans-Pacific Partnership Agreement (TPP) will provide its members zero duty market access in the largest market of USA. Our competitors, particularly Vietnam, are going to make the most use of it. Similarly, the Transatlantic Trade and Investment Partnership (TTIP) between USA and EU will open the doors of US market to our East European competitors like Romania, Poland, Slovakia and Estonia. From the leather industry’s point of view, India must soon conclude the FTA with EU which will provide zero duty access to Indian leather industry. Besides, we should also explore ways to conclude an FTA with US to penetrate this important market.
Bhaskar Sarkar, Executive Director, Engineering Export Promotion Council (EEPC)
TDB: What challenges do you face in promoting exports?
Bhaskar Sarkar (BS): Knowledge gap is a major challenge – information reaches EEPC a little late and we are not that up-to-date in import data. Technology upgradation is another challenge – EEPC traditionally did not have technology upgradation as a mandate. It has taken the onerous task of upgrading technology by means of making a bridge between the industry, academia and different government labs. We have already created this environment for 4-5 locations and soon we will create the same for another 12 more locations this year. High value added engineering exports from India is about 7%, which means 93% is medium-to-low value added exports.
TDB: How long will it take us to move up the ladder?
BS: It will take time! It’s quite evident our peer countries are faster than us – our infrastructure for export or manufacturing isn’t at par with China. In terms of value-added product, we are on the right path, but our pace of progress is quite slow.
TDB: Do you believe that the current mandate of EPCs needs to be changed if we want exports from India to increase?
BS: We do feel that the EPC mandate needs to be refocused. If we go abroad to promote India’s engineering exports, then our counterpart from China and some other country is also there to promote their products. In a globalised economy, exports and imports are two sides of the same coin. We intend to become a part of the same regional value chain, which means we may also import a product, add value to it and then export to some other country. The mandate of EPCs should be to promote trade, not only limited to exports but imports too. If we can import something and add value to the product and then export, this could also work well for us.
TDB: What is EEPC doing to promote Indian engineering products overseas?
BS: We have already exceeded the limits in our traditional countries such as US and EU, so it’s time to look for new markets. However, it is difficult for an individual exporter to go to a brand new market on its own. So, EEPC researches different countries and their demand patterns to see what India can offer, keeping in mind the price range. We also take various Indian groups to different countries. This has been helpful and we have done over 33 such collaborations all over the world.
TDB: What can be done to rejuvenate the sector?
BS: There are two kinds of solutions: a long-term solution, such as infrastructure, port facility and power issues and a shortterm solution, concerning interest subvention, etc. The rate of interest in India is comparatively higher than our peers, and so are the prices of raw materials. If the government can bring down the interest rate and prices of raw materials, we probably can do much better.
TDB: When do we see some export revival?
BS: There has been a drop across all industries, value-wise but not in quantity. Both exports and imports are decreasing, which means it's global effect. As global economy improves, India's trade will also start moving north.
Kuldeep Raj Wattal, Chairman, Carpet Export Promotion Council (CEPC)
TDB: Has your EPC evolved with time?
Kuldeep Raj Wattal (KRW): I believe all Indian EPCs, over the last many decades, have evolved. Today, we act as an effective interface between the government and the industry and our voices and views are very well acknowledged and respected by all concerned ministries.
TDB: Please describe for us the current state of affairs when it comes to carpet exports?
KRW: We are number one in the global handmade carpet market, both in terms of volume and value, and have retained this spot for the last three years. Last financial year we achieved a figure of Rs.10,000 crore in carpet exports. Today 35-40% of our exports go to EU markets, and a similar percentage heads to US and the rest is shipped to Latin America, Japan, Australia and other South-East Asian markets. Our strengths are multi-product specialisation; we are the only country that makes carpets of the lowest, medium and highest quality.
TDB: What steps are being taken by CEPC to help exporters?
KRW: We have helped many small exporters become bigger players, both in terms of value and reach. We offer them a platform to attend trade exhibition, whereby we give them all help ranging from setting up stalls to logistics-related help. We discuss and negotiate with buyers on their behalf. We are the implementing agency of many government sponsored schemes relating to skills development and training. We also conduct many seminars and buyer-seller meets. 15 years ago, we had only 2 or 3 events in one year, but now we have 20 events a year. We have literally become an event managing institution. Each year, we take around 300 companies to Domotex (Germany) where they get to know the latest designs, new ranges, and technical know-how. In India too, we organise two events per year, in March and October.
TDB: How about your funding mechanism?
KRW: Membership subscription fee, from our 2,500 members, is our main source of income. Besides, we also get assistance from the government for many events that mainly fall under MEIS, Development Commissioner (Handicrafts) or MDA schemes. We get special project-specific grants as well.
TDB: Are you happy with the export incentives currently provided to players in your sector?
KRW: We do have some suggestions. One issue relates to the fact that despite carpet industry being at par with Krishi Udyog, its due benefits are not being effectively passed to actual manufacturers, as earlier. Going forward, we also want the government to take up the issue of high import duty in many countries including Turkey, South Africa, Latin American countries, China and Russia, where at present, the import duty ranges from 17% to 50%. In US, our exporters are subjected to 6% duty in hand-tufted carpet category which is one of our strengths. We also want carpet weaving to be included under MNREGA scheme. Though we applaud the fact that we are entitled to interest subvention scheme, it’s noteworthy that our competitors in other countries are able to raise funds at 3-4% interest rate, whereas we get credit at 7.5%, post subvention.
Dr. A. Jayathilak, Chairman, Spices Board of India
TDB: What difficulties do you face in promoting exports?
Dr. A. Jayathilak (AJ): The challenges in spice exports are mainly related to non-tariff issues, particularly the quality aspects in terms of contamination, hygiene, microbial load, and pesticide residue. The lack of uniformity in food standards, guidelines and codes of practices on imported items across the globe is a challenge. The standards followed by EU countries, USA, Japan vary with great margin. The Indian spice exporters face immense challenge to sort their consignments to meet the quality standards in accordance to the importing country. With the Board’s initiative, the Codex Committee on Spices and Culinary herbs has been set up to harmonise international standards for spices, which shall ensure fair practices in trade.
TDB: What measures do you take to ensure that exporters are shipping quality spices?
AJ: At present, there are three important concerns with respect to export of spices: viz. pathogens, pesticide residues and mycotoxins. The Board has established seven quality evaluation laboratories, in some major ports, which are equipped with latest analytical instruments that are capable of testing for food safety issues with a sensitivity that meets the requirements of international regulations. The Board has also implemented mandatory testing programmes, covering major food safety issues which were hampering exports. Consignments have to obtain clearance certificate before getting exported.
TDB: What does Spice Board do to help exporters?
AJ: MDA Scheme has been implemented to provide assistance to exporters and manufactures to upgrade their processing and storage facilities to assure safety and quality of spices. We have created a platform, i.e. World Spice Congress, for interaction between importers and exporters and are organising buyer-seller meets in international and national fairs.
TDB: Does your EPC meet requirements and expectations of its exporter-members?
AJ: EPCs function under the Ministry of Commerce & Industry, and all policies are monitored and framed in accordance with the export community's requirements. The government regularly monitors the issues related to exports and takes appropriate decisions to amend the EPC mandate as required.
TDB: Is there enough awareness about Spice Board amongst MSME community?
AJ: Over 4,800 medium and small exporters are registered with the Spices Board, and they are provided assistance under various market development schemes. Registered MSME exporters are given preference when it comes to participating and setting up stalls at international trade fairs and conferences.
TDB: How much has the government helped?
AJ: Spices exports have been growing at an average annual rate of 6%, in value terms, over the past few years, and more entrepreneurs are turning spice exporters. The Ministry is continuously on top of the developments and issues like rapid alerts or new trade policies, tariffs, etc., and is pro-actively taking action to modify rules and policies in favour of exporters.
P. C. Nambiar, Chairman, Export Promotion Council for EOUs and SEZs (EPCES)
TDB: Is funding EPCES' activities a challenge?
P. C. Nambiar (PCN): Membership subscription is the only source of income for us. Earlier, the government used to give grants, but not anymore. Thus, the trade units are unable to provide services to its fullest capacity. Also, if the government makes one or two more zonal councils for EOUs and SEZs, traders and exporters will have easy access to the offices. The Councils, in turn, will be able to provide effective services to each member. Even non-members are benefitted by EPCES, because when we provide services we don’t look at whether they are members or not. Therefore, the central and state governments should work together to make the process more effective at the state level. In addition, Customs, Excise and the other agencies of the government should work in unison to make the services more effective.
TDB: What change do you recommend in the structure of EPCs in India to make them more effective?
PCN: In order to ensure a smooth flow of authentic trade information and to bridge the gap between the trade and the industry, and most importantly, to inform the government about the changing global scenarios, directions given to EPCs need to be upgraded. This will enable the government and various other EPCs to formulate an up-to-date policy. There are entrepreneurs who export multiple products and need to be registered with EPC councils, however, exporters should not be forced to become members of multiple councils. EPCs can advise the government about the changing scenario so that the government could make a purposeful policy or modify its laws. In turn, the government can also advise traders and industry about the potential and possibility of the industry. EPCs can circulate product-specific and country-specific information among exporters so that exporters can choose markets for their product and product line. But this is not happening at the moment. Currently, EPCs collect the information from various sources, and by the time it reaches to the ultimate beneficiary, the information becomes obsolete.
TDB: Are you happy with the current export incentives?
PCN: Generally, yes, but there are two exceptions. One is MAT (Minimum Alternate Tax) and the other is DDT (Dividend Distribution Tax) for SEZs. Since 2011, because of the two, the liquidity of an SEZ unit has been adversely affected. By imposing DDT and MAT on SEZs, policymakers have also damaged the pro-investor image of SEZs among foreign and domestic investors. Similarly, export-oriented units (EOUs) are standalone export promotion units. They do not get any incentive or subsidy from the government for development of infrastructure. So if the government provides subsidy on exports from EOUs, they can be revived, and probably our exports scenario will improve dramatically.
TDB: Can state governments enhance exports growth?
PCN: Several state governments need to realise that export promotion is not just a national effort, they also have a role to play when it comes to promoting exports. States should also be given an export target, so that they support exports from SEZs and EOUs. There has to be a comprehensive policy, involving the centre, state governments and of course, EPCs.
TDB: What does EPCES do to help SEZs and EOUs?
PCN: There was a proposal that the income tax benefits to SEZs and EOUs should expire in 2017, and any units operating thereafter should not be given the income tax benefits, but we were able to move up till 2020. We have been suggesting new rules to strengthen ease of doing business. Whenever there are questions raised by SEZ units and developers, we have been answering them. I, as Chairman, advise them as and when they need my help. The EPC has been trying to arrange open houses to benefit the units so that their grievances are mitigated. As far as EOUs are concerned, we have given 33 recommendations, which have not been implemented yet. Now, we are taking up this matter with the Ministry of Commerce. Any good manufactured from SEZs and sold in India should not be subjected to full Customs duty. It should be at FTA rates.
TDB: Have quality issues hampered export growth?
PCN: Quality hasn’t been an issue and the rejection rate is low. I have travelled extensively outside the country and I am in touch with several organisations, but I haven't received any quality-related complaints.
TDB: What are your thoughts on India's FTAs?
PCN: When we supply goods to a DTA unit, our goods attract a higher rate of duty than the preferential rate under an FTA. Our efforts are to ensure that the goods manufactured in SEZs are also subject to the lowest FTA rate. Domestic manufacturers do not buy from SEZs, as they prefer buying from FTA countries due to available duty concessions.
There is an organisation called World Free Zone Organisation. We are a member of this organisation. The World Free Zone Organisation is working on having a universal free-zone trade policy. Once implemented, I think territorial free-zone should have a positive impact on the Indian economy.
Ajay Sahai, Director General & CEO, Federation of Indian Export Organisations (FIEO)
TDB: Is it time for each EPC to revisit its strategy to support its sector-specific product exports?
Ajay Sahai (AS): Absolutely. In broad parameters, EPCs were commissioned by the government to undertake a similar task. But with the changing dynamics of international trade, each EPC needs to revisit its strategy to support their sector-specific product exports. They need to be more aggressive; when the market is shrinking, it is important for the EPCs to project their products in overseas exhibitions. I don’t think there is a need to overhaul EPCs’ roles, but the focus and strategy need to be revisited in the present scenario. The focus of the EPCs should also be on upgrading their technology to improve the delivery mechanism. More number of interactions with the members, responses to their queries, and an excellent liaison with government agencies will help the trade flourish.
TDB: What is our main challenge with respect to exports?
AS: The biggest challenge is the lack of branding – not many exporters are exporting under a brand name. If a company exports by a brand name, then the unit price of that product goes up by 40-50%. One of the reasons why Indian exports have taken a hit is because we have a very price-sensitive segment. If our currency appreciates against a competing currency, then we are out-priced in the market. Since most of our exports are unbranded, they can be easily replaced by products from Cambodia and Vietnam – well, branded items cannot be replaced.
There are a few large companies which operate under a brand name, but their numbers are small. Also, many Indian exporters aren’t aware of the technical standards applicable in different countries. And unless a product meets the technical standards of an importing country, we will not get an export market. So, organisations such as FIEO and other EPCs should sensitise their members about the technical standards of the importing countries.
TDB: What has FIEO been doing for brand promotion, and what are your plans in this regard?
AS: We have proposed schemes for branding products to the Ministry of Commerce. We have said that we need to provide financial support to small and medium enterprises (SMEs) because branding requires financial resources. And SMEs may not have financial resources to promote their brands overseas. We suggested that brands that are already established in overseas markets should be promoted first. The established companies, over a period of time, will lift India’s exports. And once some brands get established in the overseas market, then we can opt for expansion.
TDB: Are you happy with the export incentives that are currently being provided?
AS: I am not happy, but I am conscious of the government’s limited budget. The government has rationally distributed the incentives. However, we need to go beyond incentives, and look into the long-term competitiveness of India’s exports. It involves resolving infrastructure issues, logistic problems and transaction cost of the export sector. We need to look at factors which have been acting as impinging on the attractiveness of the India’s exports. Cost of credit in India is high, so the government has come up with interest equalisation scheme. Our logistics cost is one of the highest in the world. Transaction cost which is about 5-8% should be halved by effective use of technology. The government should address these concerns, but in the meantime it should provide some fiscal support, so that the ill-effect is neutralised to an extent.
TDB: How closely are you working with the Ministry of Commerce, DGFT and CBEC?
AS: FIEO’s job is to supplement the efforts of the government in facilitating trade. The MoC has taken an initiative to involve states in export promotion, but unless all the states participate proactively in the decision, it is difficult for the government to reach the country’s set export target. So far, the Commerce Secretary has visited over 10 states where we have organised interaction with exporters. With state governments, we are also working on strategising exports on the basis of their export products and the potential export basket. We are also working with the MoC on extending FTA outreach across the country. We are roping in DGFT to sensitise exporters under the Niryat Bandhu Scheme, where we handhold new entrepreneurs. The DGFT has been able to address many problems of the export sector. Earlier exporters had to fill 35 applications; now they have to fill just one form.
TDB: Exports aren't doing well. What do you think we should have done in the past, and what can we do now to boost exports? What steps is FIEO taking to help exporters?
AS: The current exports phenomenon is not exclusive to India – most of the countries, excluding Vietnam and a few other, have been witnessing the same scenario. Some companies, like LG, have shifted their manufacturing base to Vietnam, and this is propelling Vietnam’s electronics exports. India’s exports have not declined in terms of volume; it has only declined in terms of value. This means its employment remains intact, because of the quantity. But because of falling prices in commodity across the globe, Indian exports have been getting lesser value. As the global situation improves – and crude prices have already started to cross $50 a barrel, which makes exploration viable in the Middle East and other countries – overseas buyers will have funds to buy our products. The government however, could extend a line of credit to many countries, who are short on foreign exchange, and who have the potential to pay back. Many countries have already done it. If India does it too, we will be adding one more window of exports. With some countries such as Iran, the government should work out the payment mechanism in rupee terms. This route has seen some success and we should be able to explore this with selected countries.
TDB: To what countries should the Government of India extend line of credit?
AS: I am very bullish about Africa. We already have extended a line of credit close to $7 billion in Africa. They have been best utilised there. Manufacturing is shifting to Asia and agriculture is shifting to Africa. With land size shrinking and population increasing, food prices will go up. Once this happens, these countries will have more purchasing power. I am also bullish about CIS countries. With the Chhabhar Port deal and the new North South Corridor coming up, these countries will emerge as new markets for India’s exports. The advanced economies are also important because they import in huge quantities. A smart mix of strategy would be to concentrate on the advanced economies, and gradually spread to the emerging ones.
TDB: Can you tell us a bit about your funding mechanism? Is the funding you get from the government enough for all the activities that you need to pursue? What are your other revenue streams?
AS: None of the EPCs get any funding for managing its administrative set-up. For FIEO, we have more than 22,000 members who are providing the bulk of the funding. We do organise events for some other organisations, such as Make in India and trade fairs, where support is routed through the Centre and state governments and our members. Although each council has its own mechanism to collect funds, but most funding comes from their members.
TDB: Our services sector has been doing a lot better than manufacturing. Can this sector mitigate the decline from manufacturing?
AS: Indeed the services sector has performed better. I believe one of the reasons why we do not have a robust manufacturing sector is that unlike most developed economies we did not follow the route of agriculture to manufacturing and then to services, and instead jumped straight to services from an agriculture driven economy. We need to boost manufacturing to strike the right balance, and the Make in India initiative is the right direction to move. That said, services have indeed helped our GDP remain above the waves. However, the destination of our services exports is narrow and we are highly dependent on US and Europe. The FTA with EU remains stalled, and one of the major areas of conflict is EU's unwillingness to allow mobility of professionals which should help increase and diversify services exports. There is also scope for expanding exports basket in services beyond IT and related services. We have right kind of skilled manpower and R&D exports could be a major area of growth. There are other areas like legal processes where we are making our presence felt. We also need to negotiate FTAs keeping in mind our services sector.
Anant P. Deshpande, Executive Director, Wool Industry Export Promotion Council
TDB: The year 2016 doesn’t seem like a great time for wool exports, especially for India, with a decline in woollen exports. What is the Council’s strategy to revive exports?
Anant P. Deshpande (APD): The current trend has shown a decline of 6% in our exports, but that is due to a shift in global consumption pattern. Global warming and recession have hit the sector hard, with demand for woollen clothes from end-users in traditional markets like US and Europe slowing down. Also, the slackness has been caused by varying social factors. The decline is as much a worry for the council as it is for the overall woollen sector in the world. In India, it is a challenge on account of various taxes and rising costs of manufacturing.
We are talking positively with various policymakers on these aspects. The Textile Ministry is helping us reach untapped markets by offering various MAI (Market Access Initiatives) and market development funds. Besides, we are hopeful of entering Latin America, where we are promoting Indian woollen apparels for the first time. This will make it easy for Indian wool manufacturers to penetrate markets such as Brazil, Argentina, which have traditionally been far from our reach.
TDB: What are the challenges we’re mainly talking about?
APD: To start with, procuring wool has become more tedious and costlier than it was 10 years ago. Wool-growers would rather sell sheep for consumption than spend money on rearing, feeding and maintenance. Also, we have to pay 5% imports duty on raw wool that is imported from Australia. Our machinery is imported; and to process, we depend on electricity and labour costs, which have increased over time. The Council has communicated to policymakers that since operational costs are high, the import duty of 5% on raw materials should be waived off. Recently, the government has mandated quarantine officers for checking imports, but this is taking time, effort and costs in terms of conveyance and fees of the inspecting officer.
In addition, the current MEIS rewards do not motivate exporters. The sector has witnessed a lack of R&D and reliable statistics. Besides, labour reforms are also needed to help compete against China.
TDB: Is there a silver lining for the wool sector?
APD: Yes, our conversations with policymakers have largely been positive. Besides, if you look at labour costs in Italy and China, they are on the upswing, and many reports indicate that this will work in our favour. In fact, the Make in India programme has come at the right time, and we are hopeful that policymakers will take our issues seriously. And, I would also like to add that, the market is rife about Goods and Services Tax (GST), which if comes will help solve the issue of local taxes. These local taxes are eating up to 6% of the margins, therefore, once GST comes up, exports of woollen apparel will be impacted positively.
TDB: What kind of rewards or FTAs are you suggesting to the policymakers to focus on?
APD: We have seen many FTAs taking place. But in my opinion, Pakistan and Sri-Lanka should be taken into an agreement. The Council has put forth the idea of MFN (most-favoured-Nation), a concept which has seen success earlier.
R. K. Dalmia, Chairman, The Cotton Textiles Export Promotion Council (TEXPROCIL)
TDB: Do EPCs need reinvigoration?
R. K. Dalmia (RKD): Most EPCs are already readying themselves to meet changing scenario in the global trade by means of undertaking highly-focused export promotional activities within India and overseas, in addition to representing policy-related concerns of trade and industry.
TDB: What challenges do EPCs face while promoting exports?
RKD: A major challenge while promoting exports is creating a level-playing field in terms of tariff and non-tariff barriers faced by Indian exporters in some important markets worldwide. Several bilateral and regional trade agreements by some important markets such as EU, Canada, Australia, China, etc., are effectively curtailing growth of exports from India.
TDB: What are the challenges faced by the textile industry?
RKD: Key challenges are maintaining the competitive strength of Indian textile manufacturing sector and availability of fibres and raw material at international price levels.
TDB: What is Texprocil doing to help exporters?
RKD: Texprocil is undertaking extensive market development programme in existing as well as new markets, undertaking study reports on value added textiles, ensuring competitiveness of Indian textiles, cost benchmarking, and organising B2B programmes in important markets to reach out to a large number of importers worldwide.
TDB: What measures is Texprocil taking to ensure that the goods exported by its members are of the standards accepted in overseas markets?
RKD: In absence of mandatory quality inspection requirements, it is between importers and exporters to mutually agree upon the pre-shipment quality inspection. In fact, in present market conditions, exporters are fully aware of the importance of maintaining quality standards, as per requirement of the importing country.
TDB: Is there enough awareness about Texprocil amongst the MSME community that accounts for a large portion of the country's exports?
RKD: A large number of members of Texprocil are from the MSME sector. The Council is undertaking programmes at various textile centres across the country, on a continuous basis, to create awareness about various export promotion programmes and also about benefits available under government schemes. Texprocil is the first EPC in textile and clothing sector, and with over six decades of service to the exporting community across the country. It is popular amongst micro, small, medium and large-scale textile manufacturers and exporters, as well as amongst importers in major importing countries.
TDB: Are you happy with export incentives currently provided to players in your sector?
RKD: As far as export incentives are concerned, the Council has been in discussion with the government on the issue of extending the benefit of interest equalisation scheme to merchant exporters and also on allowing duty-free import of replenishments for home textiles. We also want speedy disbursement of all incentives.
TDB: Do you think brand India is being promoted as a reliable source of goods and services?
RKD: The Council has been promoting India's image around the world for the past several years. In most of the international events, which the Council is organising, there is an increasing level of confidence amongst importers if the Indian company is participating under the ‘Brand India’ promotion scheme of Texprocil. In fact, we are the first amongst the EPCs to initiate Brand India promotion.
TDB: How difficult is it to get support from the government, for export promotion purposes?
RKD: If the Council and the industry are able to convince the government with acceptable logic, deliverables and ultimately growth in export performance of the country, it is not difficult to get support from the government.
TDB: Despite being the second largest exporter of textiles in the world, when it comes to value additions in our export-oriented apparels, our products lag far behind to not just Bangladesh and Sri Lanka, but also to other Asia-Pacific countries. Why?
RKD: The Indian textile industry is very strong up to the yarn stage but it's not that strong at value-addition level. Missing links are a lack of production capacity in processing and absence of many large-scale weaving and knitting facilities. Various policy measures are being initiated by the government, and hopefully this issue will be taken care of in the near future.
TDB: Is Texprocil pitching for any preferential trade agreement with any country?
RKD: Texprocil is pursuing speedy conclusion of FTA with EU, Canada and Australia.
Dr. P. V. Appaji, Director General, Pharmaceutical Export Promotion Council (PHARMEXCIL)
TDB: How relevant is the concept of EPCs in today's dynamic global trade landscape?
Dr. P. V. Appaji (PVA): The EPC concept is best when it comes to promoting overseas businesses of different commodities. It has allowed government and industry to work together. A strong secretariat enables smooth communication of government’s concepts to industry and also helps raise pertinent issues of businesses with the government.
Being an EPC doesn’t mean that the government or industry cannot question us. Financial support is offered strategically, but it’s not 100%. There is always a give and take at play. The government says that I will give you something, but you have to bring something in return. This interesting arrangement puts the secretariat to actually struggle and meet the financial obligations as well as get tasks achieved. Unless the EPC performs, it doesn’t earn. For activities, including promotions, for which the Council gets funds from the Ministry, there is data to be shown on how that money is converted into real value, for every penny received. And that sets the tone for every Council to perform and sustain.
TDB: What are the challenges that Pharmexcil faces as an EPC and how you go about solving them?
PVA: It is a common understanding that an EPC will (help) elevate a small exporter to a mid-level, and the mid-level exporters to the bigger status. But if that is true, how does an EPC go to the big businesses and convince them that it is the ideal and a capable agency for them as well? And how do we convince them that we are the best people to solve their globallyspread problems? How do we see that there is ample growth for small and middle businesses? These are some of the challenges we face on day-to-day basis. That being said, we would like to add that the Commerce Ministry understands the ground realities and allows EPCs to work with freedom towards their goals. From a sectoral perspective, taxes, foreign investments and registration costs in overseas markets are some of the big challenges – trade barriers and quality issues are aplenty. But we are closely working with drug regulators on these aspects. Thankfully, we are getting continual support from the Commerce Ministry, particularly from the Joint Secretary Sudhanshu Pandey and the Commerce Secretary Rita Teaotia. We also have monthly review meetings in which problems from various departments are addressed.
TDB: What are the challenges on taxation and FDI?
PVA: Our domestic players need a level-playing field in international markets and the sector constantly rues on the topic of excise duties, VAT and CENVAT, to which the government says that they are taken care of. Further, there is a lot of accumulated Cenvat and this issue has been pending for quite some time now. Many people in exports market suffer huge taxes due to their domestic purchases. This is an issue concerning rules from the Finance Ministry and these taxes must be simplified in order to create a level-playing field.
The registration for pharmaceutical exports to individual markets like Japan and US is a long drawn process, sometimes taking even a year. Companies have to invest, file dossiers and spend huge registration costs. The government is aware of the issue and we have put forward a message to increase the assistance. This year, we have given Rs.10-12 crore reimbursements as a promotional help to the industry, which will help cover a ceiling of Rs.15 lakh per company for improving exports and getting registered with individual markets. But many countries like China and Russia have increased their registration costs, after observing our growth in US. There is a need to increase the ceiling to somewhere about Rs.1 crore, to give the industry a supporting hand.
TDB: What about FDI and brownfield investment plans?
PVA:There are instances when companies manufacturing drugs, including essential life-saving ones for Indian markets and 100% exports oriented ones, need funds for new technology. When such an export-focused company needs FDI to improve technology, they are definitely forced to look overseas. The government's mandated approval process for FDI delays and discourages investments for such export oriented units. This request has been understood, and we are informed that the government is taking a positive look into this. Unless the FDI investment process is eased, companies will not be in a position to expand.
TDB: Which FTAs should the government focus on?
PVA: Now since the government has signed CEPA with Japan, and talks are on for RCEP that involves 12 ASEAN countries, and as we understand we are also in talks with Australia for a trade pact, we want the government to speed up these pacts.
TDB: How has your overall communication with the government and the sector been like in recent times?
PVA: We are young, born in 2004, and the government has rightly put us as a knowledge-based sector. We appreciate the government’s support, in grooming and reviving pharmaceutical and healthcare exports. There are issues but we are in regular discussion with businesses and government.
KOREA (KOTRA)
Germany (GATI)
Malaysia (MATRADE)
Pakistan (TDAP)
United Kingdom (UKTI)
Other State Sponsored Initiatives (PPP type)
Speaking about our EPC, viz. Cotton Textiles Export Promotion Council, I would say the Council has been doing a wonderful job – offering all types of necessary assistance for cotton related items and its exports. We are fully satisfied with the services and facilities made available to us. They offer us updated information on policy matters and suggest us important tools and techniques to bolster our exports. They also provide us useful information on new markets.
K. K. Lalpuria
Executive Director,
Indo Count Industries Ltd
Yes, we are now seriously looking at the idea of joining the EPC that promotes our products. So far, we have been able to do business on our own, largely owing to our personal contacts and relationships. We know, by joining an EPC, though we will be able to get latest insights on our export markets, it will all come at a cost. Hence, currently, we are taking feedback from some existing EPC members and will accordingly decide.
Anshu Dhaka
Director, Kanakdhara Group
(Herbs Division)
We have had a cordial relationship with the leather EPC. The EPC has helped us participate in overseas events. I must say, the Council for Leather Exports has been working in a transparent manner, and as such we really don't have any issues with them.
Vineet Chaudhary
Saluza Exports, Kolkata
While EPCs are doing a great job on some fronts, on others, they need to do more. We have been participating in fairs organised by EPCH for quite some time now and have found it to be an ideal destination for tapping into new foreign destinations. However, they need to curb corruption. There is rampant corruption while dealing with CHAs. Inspections, QC and testing take ages. EPCs must address this if at all they are serious about creating a level-playing field.
M. Mody
Director, R. F. International
We never felt the need of being a member of an EPC. We are still clueless about their effectiveness. We are a small exporter. If we get some more awareness about how it could help us, my company may join them in future. But for now, I don’t want to spend any money on becoming a member of any EPC. These are already very tough business days for us.
Mohd. Tanveer
Fashion Jewellery Exporter,
MT Enterprises
We are not much dependent on any export promotion council as such. We have our own pan-India network that helps us in getting business. Unless our EPCs work towards improving sector related infrastructural bottlenecks such as reliable power supply, multiple layers of taxes, and access to line of credit to companies, we cannot be export-competitive.
Manmeet singh
Eikaebana Flowers, New Delhi
We are a member of Pharmexcil that takes care of senna exports, but frankly speaking we haven’t availed any benefit from the Council. We believe our association with Pharmexcil, as it stands today, is merely for namesake. Each year, they ask us to file returns – which we do without fail, but apart from that not much communication happens between us. We have our own in-house marketing team that gets us all the sectoral information necessary for us.
Shashank Rajvanshy
Partner, Apex International
Yes we work closely with ESC India and, I believe, so far it has been a great help to us as it not just makes us aware of the latest IT related policy matters but also suggest us ways to minimise costs on the international trade front.
Sunny Oswal
Propertier, Laps N Comps, Pune
GJEPC has been very helpful. Our association with them has helped us a lot. We have also exhibited our products in exhibitions such as India International Jewellery Show (IIJS) and Signature. This is one of the benefits we get from GJEPC.
Neeta Boochra
Director, Indo Gem Exporters
We are associated with Engineering Exports Promotion Council. We do pay them membership fee, but we get 50-60% back in form of subsidies. We also get regular updates from them on policy and other government initiatives. Overall, they have been of great help.
S. K. Midha
Chief Managing Director,
ECL Magtronics Pvt. Ltd.
We are associated with both FIEO and APEDA. However, we don’t get any support from them at all. Support is extended only to preferred exporters. Whether in domestic trade events or in international ones, only three or four select exporters are chosen. There is no equality. There should be more transparency in the procedures of APEDA and FIEO, and our more engagements with the Ministry of Commerce.
Mohan Narang
Managing Director,
K. S. Commodities
In my opinion, EPCs are of no real help at all. They are not practically good. Though they do come up with several marts, the location and planning is such that it ends up being not so practical for us. It would be better if they sought feedback from us. They are just working on their own and without any knowledge of the practical problems which we are facing.
Dilip Kumar Khairajani
Director, Nazrana Chikan, Lucknow
We were earlier associated with GJEPC, but we were not getting enough support. Our linkages were very transactional. We used to pay them their annual membership fee and send our exports figure. That was it. We didn’t have much interaction.
Archana G. Gupta
Owner,
Touchstone Gems & Jewellery India
We are associated with The Export Promotion Council for Handicrafts (EPCH) and we believe that so far, the Council has been doing an excellent job. The only thing we want to highlight is the need for speedier communication with them, because sometimes, due to bureaucratic tangles, our concerns are not dealt with on time. These are times of cut-throat competition and such a delay, at times, puts us in a disadvantageous position. We hope EPCH improves on this.
B K Kabra
Director, Kabra Exports
I think the EPCs aren't much of help to the smaller players. In my opinion, they need to give MSMEs the extra push that is needed. There has to be greater awareness and education that should be passed on to smaller players – be it in fashion or textiles or whichever industry. I will be very grateful if EPCs can arrange for trade shows that are highly marketed and promoted to international buyers, be it promotional road shows, etc. These will help build brand India and will also support the cause of smaller export-manufacturers in the country.We need a lot of awareness to be created across international markets for our products. Also, trade shows where we can exhibit at a lower cost than normal would be very helpful.
Priyanka Desai
Founder & Creative Director
Praia Couture
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