Role and Functions of the Department
The primary function of the Department of Commerce is to create an appropriate institutional framework and policy environment for facilitation and growth of external trade. In order to do this the Department formulates foreign trade policy including policies for export promotion. The export effort of the Department is supported by a large number of organisations and institutions viz., Commodity Boards, Export Inspection Councils, Export Promotion Councils, Export Credit and Guarantee Corporation, India Trade Promotion Organisation, etc., which work as autonomous bodies or under the direct administrative control of the Department. The Department also has the responsibility of development, operation and maintenance of Special Economic Zones including the fiscal regime, investment policy and regulatory framework of these Zones. The Directorate General of Foreign Trade (DGFT), an attached office of the Department, implements the Foreign Trade Policy (FTP).
In addition to the above, the Department of Commerce engages in trade negotiations and agreements at multilateral, regional and bilateral levels. It interacts with international agencies such as the World Trade Organisation (WTO), the United Nation Conference on Trade & Development (UNCTAD), the Economic and Social Commission for Asia and Pacific (ESCAP), etc. as well as individual countries or group of countries on a wide range of issues including tariff and non-tariff barriers, international commodity agreements, preferential / free trade arrangements, investment matters, etc. Functioning under the Department are Commercial Offices attached to Indian Missions abroad which help in shaping international trade policy.
The Department also oversees policies of state trading through Corporations established for this purpose, i.e., the State Trading Corporation and the Minerals and Metals Trading Corporation. Its other functions include carrying out investigations related to anti-dumping duties and countervailing duties through the Directorate General of Anti-dumping and Allied Duties (DGAD), looking after production, distribution and development of plantation crops (tea, coffee, rubber and cardamom), protection and maintenance of enemy properties under the Enemy Property Act, 1968 and administration of Directorate General of Supplies and Disposals for purchase and inspection of stores for Ministries / Departments and offices of the Central Government.
A list of various statutes under the jurisdiction of the Department of Commerce is at Annexure -I.
An amount of Rs. 2338.93 crore was provided in the budget of 2004-05(BE) for discharging the various functions of the Department which included schemes giving special focus on welfare and development of vulnerable groups of people and inaccessible regions of the country. The scheme specific financial resources made available through plan schemes for supporting the activities of the Department is given in Annexure -II.
The organizations working under jurisdiction of the Department also disseminate various information about their respective activities through a large number of websites. A list of websites related to the Department and its organizations is given at Annexure – III.
Highlights of Performance
Export Performance
India’s merchandise exports crossed the US $ 60 billion mark in the 10 months of the current financial year (2004-2005), having reached US $ 61 billion during April 2004 to January 2005, which was 26 % higher than in the corresponding period of the previous financial year. India’s merchandise exports should therefore exceed the target of 16 % growth set for the year to reach a level of around US $ 75 billion. With the high growth achieved despite strengthening of the rupee vis-à-vis the US dollar and the overall impact of rise in fuel prices on competitiveness, the country is expected to double its percentage share of world merchandise trade by increasing its exports to US $ 150 billion by 2009.
According to the latest available provisional disaggregated data from DGCI&S for April-October 2004-05 moderate to high growth was witnessed in exports of iron ore (209.8%), plastic & linoleum (88.5%), petroleum products (84.6%), engineering goods (38.6%). Among the top 15 countries for exports Singapore recorded the highest growth of (118.6%) followed by China (70.1%), Korea (62.9%), UAE (48.3%), Israel (33.0%), Belgium (31.4%).
India’s export performance during 2004-05 was influenced by a number of factors which included continued trade promotion and trade facilitation efforts of the Government and a focused approach announced in the new Foreign Trade Policy to double exports during the next four years. The high growth rate registered by the manufacturing sector reflecting productivity changes and growing competitiveness of Indian exports coupled by recovery of global economy and world trade also helped maintain buoyancy in export growth over and above the targeted levels.
Foreign Trade Policy (2004-09)
A comprehensive Foreign Trade Policy (2004-09) was announced on 31st August, 2004. The basic objective of this policy is to double India’s share of global merchandise trade by 2009 and to make exports an effective instrument of economic growth and employment generation. The key strategies adopted in the policy to enhance exports include simplification of procedures, reduction in transaction cost, neutralisation of incidence of all levies and duties on inputs used for export, facilitating development of India as a global hub for manufacturing, trading and services and identifying and nurturing special focus areas like agriculture, handlooms, handicraft, gems & jewellery and leather, footwear etc. In addition, export promotion schemes like ‘Vishesh Krishi Upaj Yojna’ and ‘Served from India’ scheme to accelerate the growth of agriculture and service exports were also announced.
To bring down transaction costs of exporters during the year, procedures were simplified, import-export licences were issued online and various community partners like Banks, Customs and Directorate General of Foreign Trade (DGFT) were linked through the Electronic Data Interchange(EDI) system. Specific time limits were prescribed for issuance of various licences and related operations. At present thirty-two regional offices of DGFT have been fully computerized and approximately 70% import-export licences are being issued online. A recent survey done by the Exim Bank indicates that the transaction costs of Indian exports have come down significantly due to these initiatives taken by the government.
Special Economic Zones (SEZs)
With a view to giving thrust to exports while at the same time catalyzing greater economic activity and employment in enclaves of export excellence, 36 SEZs have been approved and all the 8 Export Processing Zones (EPZs) have been converted into SEZs. These are fully functional. In addition 3 new SEZs approved for establishment at Indore, Jaipur and Kolkata have recently commenced operations. Exports from SEZs during 2003-04 registered a growth of 44 per cent in dollar terms as compared to the previous year. There are 768 units in operation in the SEZs so far providing employment to about 1 lakh persons, about 40 per cent of whom are women. The private investment by entrepneurs for establishing units in SEZs is about Rs.2000 crore of which foreign / NRI investment is about Rs.500 crores, accounting for nearly 25 per cent of total investment.
In order to give stability to the policy regime, Government intends to enact a legislation for SEZs as early as possible.
Performance of Trading Corporations
The trading entitities under the administrative control of the Department have recorded good performance during the year. The State Trading Corporation of India (STC) Ltd. registered a record turnover of Rs.6900 crore during the nine-month period from April-December 2004. This is about 30% higher than the corresponding period of the previous year. The Corporation’s profit before tax is Rs. 27 crore which is almost double of its full year target. The record achievement is attributed to the number of new initiatives such as signing of MoUs with multinational companies for import of FMCG and IT products and diversification into imports and domestic sale of petro-chemicals. The Corporation hopes to end the year with a turnover of Rs.9000 crore.
The first 8 months of the current fiscal witnessed a record performance by MMTC with business turnover exceeding Rs.10,000 crore by the end of November 2004. This has been the highest level achieved by the company since its inception and exceeds last year’s performance by over 107%. The business growth has been in all areas encompassing MMTC’s operations. The growth in export during the first 8 months of the current year has been of the order of 76%. Increase in import operations also has been impressive recording an increase of 123% over the level achieved during the same period last year. The improved operations were duly reflected in the bottom line of the Company which recorded 36% higher net profit over the annual profit of the previous year with 4 months still to go. Higher net profits have been achieved through effective cost control, better fund management and improved operating profits.
Multilateral Negotiations
On the multilateral trade front, India took an active part in the revival of the Doha process by interacting with both the developing and the developed countries. As a result of these efforts, the Framework Agreement was adopted by WTO member countries in the General Council meeting in Geneva of the WTO on 1st August, 2004 ensuring that the negotiations were back on track. India was able to achieve all her major objectives in this Framework Agreement, including in the crucial area of agriculture. With a view to safeguarding the interests of farming sector, India made concerted efforts with like-minded alliance on agriculture and the G-33 alliance on Special Products. This ensured that the elements and principles incorporated in the agreed framework on agriculture would lead to substantial reductions in trade-distorting domestic subsidies provided to their farm sector largely by the developed countries, a credible end date for elimination of their export subsidies and substantial market access improvements for products of export interest to developing countries.
Similarly, India negotiated successfully in the area of non-agricultural market access (NAMA), Services, and ensured that the Framework Agreement includes a firm commitment to addressing Implementation Issues and operationalisation of Special and Differential Treatment (S&DT) for developing countries on a time-bound basis. One of the significant achievements in the Framework Agreement was the removal of 3 of the 4 Singapore issues on which India had raised objections – namely Investment, Government Procurement and Competition.
Regional Trading Agreements
While attaching prime importance to a fair and rule based multilateral trading system, the year saw the launch of fresh initiatives for regional free trade agreements or comprehensive economic cooperation agreements as well. During the year, India continued to engage in transforming the Preferential Trade Arrangement (PTA) with SAARC countries into a SAARC Free Trade Area (SAFTA), which would come into existence from 1st January 2006. Besides, an Early Harvest Programme in BIMSTEC which covers countries on the rim of the Bay of Bengal, negotiations with ASEAN countries collectively and with countries with Singapore individually are nearing completion. Negotiations for a PTA with MERCOSUR grouping of Latin America are complete and talks on an agreement with SACU (South Africa Customs Union) are on the anvil.
At present, India has a full-fledged FTA with Sri Lanka. There is a Preferential Trade Agreement (PTA) amongst the 7 SAARC countries which is in the process of being transformed into an FTA called SAFTA to be fully effective from 1st January, 2006. An Early Harvest Programme has been signed identifying common list of items for exchange of tariff concessions as a first step towards establishing a Free Trade Area between India and Thailand. India is also currently negotiating FTAs or comprehensive economic cooperation agreements with Singapore and the ASEAN as well as with the MERCOSUR countries (Brazil, Argentina, Uruguay and Paraguay) and SACU – a grouping of 5 South African countries lead by South Africa known as the South Africa Customs Union.
A Free Trade Area (FTA) Cell has been constituted in the Department to deal with representations of domestic industry regarding adverse impact, if any, of FTAs on specific sectors and also, to examine suggestions for amendments to agreements on Free Trade Areas in terms of either inclusion or exclusion of items of concern to domestic industry. Representations are generally received in the event of a surge in imports which may impact on domestic industry.
A new initiative on Gender Budgeting was taken up in the Department in accordance with the guidelines received from the Ministry of Finance. Since the schemes and programmes supported by the Department have export promotion focus allocation of funds, setting of targets and monitoring of programmes have not been designed to capture any gender specific information so far. However, since some schemes are expected to have gender specific benefit, gender oriented monitoring has to be evolved over time.
The Department has established a Gender Budget Cell under the Budget Division. This Cell is in the process of identifying beneficiary oriented schemes that have potential for targeting women beneficiaries to a significant extent. All the implementing agencies, in consultation with the newly created Cell in the Budget division, are being encouraged to devise appropriate mechanism to target, and monitor the flow of benefit to women under various schemes as part of their 2005-06 Action Plan.
Annexure - I
LIST OF VARIOUS ACTS UNDER THE ADMINISTRATIVE CONTROL OF DEPARTMENT OF COMMERCE
1. The Foreign Trade (Development and Regulation) Act, 1992
2. The Spices Board Act, 1986
3. The Rubber Act, 1947
4. The Tea Act, 1953
5. The Coffee Act, 1942
6. The Marine Products Export Development Authority Act, 1972
7. The Agricultural and Processed Food Products Export Development Authority Act, 1985
8. The Enemy Property Act, 1968
9. The Export (Quality Control and Inspection) Act, 1963
10. The Tobacco Board Act, 1975
