Export promotion measures are public policy measures taken by the government of a country to potentially enhance the exporting activities and employment of that country. In India, a number of export promotion schemes have been in existence for some time which promote the industries that have a potential for developing and competing with foreign industries. A good example of export promotion in India is the development of EPZ, FTZ and SEZ.
Objectives of Export Promotion measures in India
- To compensate exporters for high domestic cost of production
- To provide assistance to exporters in setting up a fully independent export unit
- To increase relative profitability in domestic market as compared to foreign market
- Provide opportunity to achieve economies of scale and growth
- To achieve export lead growth
- To Reduce the effect of domestic recession
- A platform for production houses to sell surplus
Export Promotion measures in India – EPZ, FTZ, SEZ
EPZ – Export Processing Zone
EPZ are industrial enclaves which are formed in an international custom territory of a country (usually situated near airport or sea port). The entire production of such a zone is extended for export, it has economic laws other than the economic laws of the country. Such zones are provided good infrastructure and industrial flats are available at concessional rates.
- Foreign Direct Investment upto 100% is allowed.
- EPZ units are allowed to import and export capital goods without payment of any duties.
- Manufacturing units are given tax holiday for a limited time period.
- To attract foreign investment and earn foreign exchange
- To generate employment
- Promote technology and create skilled man power
- To increase the economic growth of the country
The 1st Export Processing Zone was at Kandla in Gujarat – 1965
S E Z – Special Economic Zones
SEZ policy was announced in April 2000 and was under foreign trade policy, now it is governed by the SEZ Act passed in late 2005.
A Special Economic Zone is an enclave of business companies which are predominantly engaged in export oriented production. It is an area of the country selected by government for its development.
- Infrastructure of a Special Economic Zone consists of manufacturing units, townships, roads, schools, hospitals and other services
- SEZ are open to all fields like manufacturing, trading and services
- Tax benefits are much more than EPZ
- Generation of employment
- Promotion of export oriented activities
- Generation of foreign exchange
- Development of infrastructure
- Increase the total economic activity
- Providing economies of scale advantage to the industry
- Providing Assistance to the Government
- Providing a competitive platform to entrepreneurs
- A duty free zone for import of various goods
- 100% Foreign Direct Investment is allowed
- There is less interference by the custom department for inspection purpose
- Sub-contracting of a part of production is allowed
- Units are allowed to sell a part of production in domestic market
- SEZ units are allowed to maintain their account in a simplified forum
- Income Tax exemption upto 100% on income from export for 1st 5 years, 50% on next 5 years and 50% of retained profit for next 5 years
- Exemption from Central Sales Tax
- Exemption under minimum alternate tax (Sec. 115)
- Single window system for clearance of documents at state and general level
- Exemption from service tax
F T Z – Free Trade Zone
Goods imported to free trade zones may be re-exported without any processing in the same form while in Export Processing Zone certain value addition has to be done through manufacturing and processing.