The pharmaceutical industry has expressed satisfaction over the foreign trade policy announced by commerce minister Anand Sharma in which the minister has extended the DEPB Scheme up to December 2010.

Expressing satisfaction over the new foreign trade policy, former Pharmexcil chairman Dinesh Modi said that the industry will welcome the announcement as there are several positive features in the policy. Apart from extending the DEPB scheme by another one year, the government has expanded the Focus Market Scheme (FMS) by adding another 26 countries, 16 new markets in Latin America and 10 in Asia-Oceania. Besides, the incentive available under Focus Market Scheme has been raised from 2.5 to 3 per cent.

But the industry was looking to add two more countries in the Focus Market Scheme, Russia and Iraq.

Modi said there is some discrimination in the policy. In order to accelerate exports and encourage technological upgradation, additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports. The duty credit scrips can be used for procurement of capital goods with Actual User condition. This facility shall be available for sectors of leather, textiles and jute, handicrafts, engineering, etc. But, pharma industry has been excluded from this benefit, Modi regretted.

The extension of DEPB scheme will prove to be a big relief to the beleaguered pharma exporters. Obviously, the pharma exporters have termed the commerce ministry decision as 'a big relief at this time of economic crisis'.

The DEPB scheme was first announced by the central government on April 1, 1997 under EXIM Policy 1997-2002. It is an export promotion scheme and envisages grant of DEPB credit entitlement to an exporter at the time of export at an ad-valorem rate notified by DGFT (director general of Foreign Trade), in relation to FOB value of the export product.

These rates are based on the computation of basic customs duty suffered by the exporters on the inputs listed in the standard input-output norms (SION) applicable to the export product. The crucial feature of the DEPB scheme is that all the inputs listed in the SION are deemed to have been imported and to have suffered customs duties. DEPB rates are finalised by the DEPB committee, chaired by additional DGFT and consists of representative from Ministry of Finance also. Value caps have been imposed on export products having DEPB rates of 15 per cent or more to curb the tendency of unscrupulous exporters to avail most of the runaway benefits by over-invoicing export.