Modified EHTP to help hardware export

NEW DELHI: Mait - the apex body of IT Hardware has hailed the new EXIM policy
for 2002-07 announced by Muralsoli Maran, Union Minister of Commerce and
Industry, Government of India. The EXIM Policy has laid a significant thrust to
make the Electronic Hardware sector globally competitive and exports oriented.
The Policy has mentioned modifications to the Electronic Hardware Technology
Park (EHTP) Scheme, which will help the domestic hardware industry, meet the
challenge of zero duty regime under the IT Agreement-I of the WTO. Further,
relaxation in monitoring of the NFEP criteria from annual to cumulatively for a
block of five years will significantly ease the pressure on the industry.

The following major policy changes will positively impact the hardware
industry:

1. Supplies of Information Technology Agreement (ITA-I) items to the Domestic
tariff Area (DTA) from EOU/EPZ/EHTP & SEZ to be considered as fulfillment of
exports obligation, provided that the items are manufactured in the unit and
attract zero rate of basic customs duty. This is in line with MAIT
recommendation as in a zero duty regime, 'exports' or 'imports' or 'DTA sales'
will mean the same.

2. Net Foreign exchange Earning as a Percentage of exports (NFEP) shall be
calculated cumulatively for a period of five years from the commencement of
commercial production. This will provide industry with the necessary gestation
period as in most cases, exports cannot immediately happen on commencement of
production. Earlier, NFEP was calculated on an annual basis.

3. Simplification of exports and imports especially introduction of 8 digit
HSN and minimal physical examination of import consignments by the customs will
help reduce turnaround time.

The hardware manufacturing Industry in India is faced with negative tariff
structure. Import duty on capital goods and input raw materials has been
significantly higher than that on finished output. With the IT industry slated
to hit zero duty regime in 2005, the incidence of negative tariff would lead to
significant adverse impact on domestic manufacturing. However, now, with
modifications in the EOU/EPZ/EHTP schemes with considerable relaxation in the
Exports Obligations and NFEP criteria, the industry can confidently face the
challenge of the zero duty regime.

Commenting on the outcome of the EXIM Policy 2002-07, MAIT director, Vinnie
Mehta said,

"The EXIM Policy 2002-07 is a positive sequel to the recently announced
Medium Term Export Strategy. Permitting ITA-I items already at nil customs duty
to be sold unhindered in the DTA and also DTA sales of such items being
considered towards fulfillment of NFEP criteria and Exports Obligation (EP) will
help the hardware industry build global scales and harness the associated
economies.

Further, continuance of concessional access - at 50 per cent of the existing
rate of duty for upto 50 per cent of the exports value, into the DTA, from EoU/EPZ/EHTP
is essential as concessional DTA access is an incentive for exports. If the
concessional access were withdrawn, it would have rendered supplies to DTA
non-price competitive."