THE BHOPAL SCHOOL OF SOCIAL SCIENCES

Promoted by the Catholic Archdiocese of Bhopal

NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

UNIT IV
TRADE PROMOTION ORGANISATIONS
Module 1
INTRODUCTION

Export development has a significant stance in the economic policy of Indian government.
Promotion as one of the vital elements of marketing mix plays a crucial role in fuelling up
India’s overseas trade. Export promotion refers to the encouragement offered by the
government to the exporters through various policies and measures that motivates them to
undertake trading activities with a view to enhance country’s overall exports. In order to
achieve the objective of augmenting exports, various export marketing organisations such as
merchant exporters, canalising agencies, State Trading Corporations (STC), export houses
etc. have been set up by the government of India at different levels. These organisations are
specialised agencies which facilitate and explore the marketing of Indian goods and services
in foreign countries. Export promotion organisations like Export Promotion Councils (EPC),
Export Development Authorities, Commodity Boards, India Trade Promotion Organization
(ITPO) also have been set up which offer numerous incentives and facilities to the exporters
which plays a considerable role in promoting Indian products abroad. These bodies undertake
export marketing and communication at overseas level by using several elements such as
publicity and advertising to promote Indian products at global level.

Export promotion organisations differs from export marketing organisation in the sense that
the promotion organisation do not demonstrate direct participation in export trade transaction
but aid indirectly by providing assistance and guidance to the marketing and trading firms.
They occupy a distinct position by playing a positive role in encouraging and diversifying
India’s export trade. All those organisations that assist promotion of India’s product in
international market are called export promotion organisations. These export promotion
organisations also offer training facilities, market intelligence and undertake market research
programmes. They extend institutional infrastructure, provide advice and guidance to Indian
exporters. Government of India has established a number of institutions, organisations and
corporations to encourage export
International trade has a significant stance in the Indian economic policy. This can be
seen from the government’s trade promotion efforts. Export promotion refers to the
encouragement offered by the government to the exporters through various policies which
motivates them to undertake export activities with a view to enhance country’s overall
exports.

Subject : Economic History of India (1858-1947) 1

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Promoted by the Catholic Archdiocese of Bhopal
NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

However, the export promotion organisations do not demonstrate direct participation in

export trade transaction but aid indirectly by providing assistance and guidance to the
marketing and trading firms. They occupy a distinct position by playing a positive role in
encouraging and diversifying India’s export trade. All those organisations that assist
promotion of India’s product in international market are called export promotion
organisations. These export promotion organisations also offer training facilities, market
intelligence and undertake market research programmes. They extend institutional
infrastructure, provides advice and guidance to Indian exporters. Government of India has
established a number of institutions, organisations and corporations to encourage export
promotions from India that can be broadly be classified into following categories:
• Government Department
• EPC/Commodity Boards
• Service Institutions
• Inspection Agencies
• Export Corporations

Features of Export Promotion Organisation

1. Service organisation
Export promotion organisation is basically a service organisation and not trading organisation
dealing with export promotion activities. These organisations are not directly involved in
trading activities but are indulged in promoting and diversifying Indian exports by
supporting, advising and guiding Indian exporters in channelizing their products in
international markets.
2. Creates favourable impression of India’s product in overseas market
Export promotion organisation creates favourable image of Indian commodities at
international level by undertaking several promotional and publicity campaigns. This
favourable image signifies approval of India’s industrial development and placement at
global level.
3. Result of government’s initiative
It is a government of India initiative in establishing export promotion organisations in India.
These organisations facilitated development of institutional infrastructure for enhancing
export. The government aided financial support to these institutions to carry out export
activities smoothly and efficiently.
4. Availability of services to exporters
Export promotion organisation provides easy and economical export related necessary
services to the exporters. These organisations are established to benefit exporting
communities in India so that these exporters are motivated to undertake aggressive export
activities. The services are available easily and economically to all exporters
Export promotion organisations operating in India;
 Export Promotion Councils (EPCs)
 Commodity Boards (CB)
 The Marine Products Export Development Authority (MPEDA)
 Agricultural and Processed Food Products Export Development Authority (APEDA)
 Federation of Indian Export Organisation (FIEO)

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Promoted by the Catholic Archdiocese of Bhopal
NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

 Indian Institute of Foreign Trade (IIFT)

 Indian Institute of Packaging (IIP)
 Indian Council of Arbitration (ICA)
 Free Trade Zone (FTZ)
 Export Processing Zone (EPZ)
 Special Economic Zone (SEZ)
 India Trade Promotion Organisation (ITPO)
 Export Inspection Council (EIC)

China and India are among the largest economies in the world today. They have also
been among the fastest growing economies over the last two decades and a half. China is
reported to have invested far more than India in physical infrastructure almost since the
1980s. Its trade partners increased from a small number of countries and regions. Although
India was the founder member of GATT in 1948 and was one of the 23 founding parties of
GATT, but entered late in trade openness and was a restricted economy till 1990s. It
attempted economic liberalisation but failed due to politics taking precedence over
economics. Composition and direction of India’s trade was also confined contracting foreign
trade. Based on the Chinese model, further Indian government initiated with setting up of
SEZ to promote Indian exports in global market.
Type of Export Zones
Free Trade Zone (FTZ) – Entire city or Jurisdiction
SEZ – Entire province or region
EPZ – Enclave or Industrial Park
Enterprise Zone – Entire or part of city
SEZ- SPECIAL ECONOMIC ZONE
Special Economic Zone (“SEZ”) covers broad range of zones, such as free trade zones,
export-processing zones, industrial parks, economic and technology development zones,
high-tech zones, science and innovation parks, free ports, enterprise zones, and others.
Following are the main characteristics of Special Economic Zones (SEZ):
1. Geographically demarked area with physical security
2. Administrated by single body/authority
3. Enjoying financial and procedural benefits
4. Streamlined procedures
5. Having separate custom area
6. Governed by more liberal economic laws
7. A designated duty free enclave to be treated as foreign territory only for trade
operations and duties and tariffs
8. No licence required for import
9. Manufacturing or service activities allowed
10. SEZ units to be positive net foreign exchange earner within three years
11. Domestic sales subject to full customs duty and import policy in force
12. Full freedom for subcontracting.

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Promoted by the Catholic Archdiocese of Bhopal
NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

The genesis of SEZs in India lies in the basic model of EPZ. Resembling Chinese model,
the government of India initiated setting up of SEZ. With the realisation that SEZ are vital for
the countries success and economic development, India was one of the first Asian countries
to recognise the significance and effectiveness of export processing zone model in promoting
exports. In 2000, the Export-Import (EXIM) Policy of India shifted towards a new scheme of
Special Economic Zones (SEZs), wherein EPZs were converted into SEZs. This instigated
setting up of 1st EPZ in Asia in the year 1965. The first EPZ model was set up in Kandla,
Gujarat. Later India started extending its policy of EPZ to other places with the objective of
tapping skills of manpower, natural resources, and for accumulating foreign reserves through
exports. EPZ proved as an escalation of exports but it did not meet the expectations as per
China’s export success in international market. Taking note of this, India realised the need to
overcome the shortcomings of EPZ.EPZ were facing numerous regulatory issues and were
characterised by several drawbacks such as multiplicity of control and clearance, absence of
world class infrastructure, high transaction cost etc. This resulted into conversion of existing
EPZ in SEZ.
EPZ - Export Processing Zone
EPZ are enclaves generally formed in specified territorial or geographical locations
wherein incentives and privileges are extended to industrial processing units. Almost, the
entire production of such zone is normally intended for exports.It was set up by the
government with an aim to initiate infrastructural development and tax holidays in various
industrial sectors in the country. EPZ has persistently accelerated and flourished export
activities thereby contributing economic growth of India. There are several objectives
behind the formation of EPZ:
 Increase in export earnings
 Encourage foreign investment in export sector
 Encourage transfer of technology
 Generates employment opportunities
 Promotes economic growth
 To provide improved and superior infrastructural facilities in industrial units, setup
under EPZ
 Introducing the privilege of tax holidays
 EPZ in India are entirely devoid of all kinds of duties and taxes
 100% FDI is granted to these zones.
The basic objective behind setting up of EPZ differs from country to country depending
upon the economic compulsion or needs. In some cases the objective is to attract heavy
industries and while in others it has been to develop and light industries requiring modest
capital investment in sectors such as textiles, consumer electronics, household appliance,
furniture food processing etc.

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Promoted by the Catholic Archdiocese of Bhopal
NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

EPZ in India were established at different points of time in different states.

 Kandla EPZ (Gujrat)- Multi-Product Zone- established in 1965 is a multiproduct
zone
 (SEEPZ) Santacruz electronic export processing zone- founded in 1974 is a single
product zone.
 Madras EPZ – founded in 1986 is a multiproduct zone
 Cochin EPZ founded in 1984 is a multiproduct zone
 FALTA EPZ (West Bengal)- founded in 1984 is a multiproduct zone
 Noida EPZ (Uttar Pradesh)- establishedin 1985 is a multiproduct zone
 Vishakhapatnam EPZ (Andra Pradesh) – initiated in 1989 is a multiproduct zone.
In most cases the incentives in EPZ comprised of duty free imports of capital goods,
raw-material components availability of infrastructural facility, tax relief, attracting foreign
exchange, freedom from administrative and bureaucratic control and alike.
Facilities and incentives enjoyed by EPZ
In the current era of globalisation, export promotion in developing countries is seen as an
important policy for economic growth. Various measures are being adopted by the
government to promote export competitiveness in the overseas market. Following are the
facilities and incentives enjoyed by EPZs/EOUs in India:
 EPZ avail incentives in the form of duty-free import of capital goods, raw materials,
permissible extent of sales in domestic tariff area, tax concession etc.
 Single Window clearance.
 Import license exemption
 Exemptionfrom payment of custom duties on import of all industrial inputs
 Export earnings continue to be exempted from tax even after tax holiday is over.
 Supplies from DTA to EPZ units are regarded as deemed exports and hence they are
exempted from the payment of excise duty. This makes high quality inputs available
at lower price.
 The units set up under EPZ enjoys concessional rent for first three years and are also
eligible for leased industrial plots and standard designed factories.
 EPZs are permitted to sub-contract part of their production process to the units in
DTA on case to case basis.
 Foreign equity up to 100% is permissible to EPZ units.
 Uninterrupted power and water supply is provided by the state government or local
authorities to EPZ.
Three-Tier System in EPZ
 Tier One is headed by Ministry of Commerce. They are indulged in drafting and
implementing policies and review performance of each such zone.

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Promoted by the Catholic Archdiocese of Bhopal
NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

 Tier Two is headed by Board of Approval. They are responsible for emancipation of
proposals for opening up new enterprises in the new zone.
 Tier Three is headed by the Development Commissioner who is a chief executive of
EPZ vested with power of day to day functions of the zone that are related to
administration, approval of investment, regulatory provisions etc.
Hence EPZ is designed to provide an internationally competitive duty free environment
at low cost production. Each zone is provided with necessary infrastructural facilities like
developed land, standard design factory building, roads, power, water supply, drainage and
custom clearance facilities. It provides a combination of financial incentives, streamlined
business administration and trade liberalisation. EPZ has become increasingly common as
countries have shifted from import substitution policies to export growth policies. But EPZ
had few limitations for which the government felt to review the policy. With a view to
overcome the shortcomings experienced by EPZ on account of the multiplicity of controls
and clearances, absence of world-class infrastructure, and an unstable fiscal regime along
with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs)
Policy was announced in April 2000.
SEZ is a special geographical area created within the country with economic laws that
are different from the countries typical economic laws with major objectives to be achieved.
SEZ as an institutional measure supports economic policy facilitates shift from import
substitution to export promotion with an objective of promoting India’s foreign trade with
greater income and employment opportunities.
Difference between EPZ and SEZ
 SEZ are much larger in geographical size as compared to EPZ with a large scope of
business
 Tax benefits are more to SEZs in comparison with EPZ
 Laws concerning certification of imports are much more relaxed in SEZ than EPZ
 Customs department has less interference in the inspection of the premises in SEZ as
compared to EPZ.

This policy intended to make SEZs an engine for economic growth supported by quality
infrastructure complemented by an attractive fiscal package, both at the Centre and the State
level, with the minimum possible regulations. The Special Economic Zones Act, 2005, was
passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June,
2005. The SEZ policy aims at creating competitive, convenient and integrated Zones offering
World class infrastructure, utilities and services for globally oriented businesses. The main
objectives of the SEZ Act are:
 Generation of additional economic activity
 Promotion of exports of goods and services
 Promotion of investment from domestic and foreign sources
 Creation of employment opportunities

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Promoted by the Catholic Archdiocese of Bhopal
NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

 Development of infrastructure facilities.

Fig. 10.3: Statistics of SEZ in numbers

[Source: E-book Department of Commerce.pdf Statistical data of India’s foreign trade.pdf 4

years Initiative and Achievement of Dept of Commerce (2014-15 to 2017-18)]
The SEZ Rules provides different minimum land requirement for different class of SEZs.
Every SEZ is divided into a processing area where alone the SEZ units would come up and
the non-processing area where the supporting infrastructure is to be created. The government
of India has offered multi privileges and benefits to augment the production and exports from
SEZ units. As per the source there are altogether approximately 213 operational SEZ in India
as on22.01.2019.
With this initiative the government expects SEZ to achieve the following objectives:
1. Provide fillip to manufacturing sector
2. To attract and encourage substantial investments in SEZ units pertaining to
manufacturing sector
3. Boost infrastructure
4. Generating employment opportunities.

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Promoted by the Catholic Archdiocese of Bhopal
NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

The SEZ Rules provide for

 Simplified procedures for development, operation, and maintenance of the Special
Economic Zones and for setting up units and conducting business in those zones
 Single window clearance for setting up a unit in a Special Economic Zone;
 Single Window clearance on matters relating to Central as well as State
Governments.
 Simplified compliance procedures and documentation with an emphasis on self-
certification.
How to set up SEZ
The functioning of SEZs is governed by a three tier administrative set up.
 Board of Approval - The apex body and is headed by the Secretary, Department of
Commerce.
 The Approval Committee - The Zone level deals with approval of units in SEZs and
other related issues.Each Zone is headed by a Development Commissioner, who is
ex-officio chairperson of the Approval Committee.
 Once SEZ has been approved by the Board of Approval and Central Government
and they notify the area of the SEZ, the units are allowed to be set up in SEZ. All the
proposals for setting up of units in the SEZ are approved at the Zone level by the
Approval Committee consisting of Development Commissioner, Customs
Authorities and representatives of State Government. All post approval clearances
including grant of importer-exporter code number, change in the name of the
company or implementing agency; broad banding diversification, etc. are given at
the Zone level by the Development Commissioner. The performances of the SEZ
units are periodically monitored by the Approval Committee and units are liable for
penal action under the provision of Foreign Trade (Development and Regulation)
Act, in case of violation of the conditions of the approval.
Terms & Conditions for Setting up of SEZ
1. Only units approved under SEZ scheme would be permitted to be located in SEZ
2. The SEZ units shall abide by local laws, rules, regulations or bye-laws in regard to
area planning, sewage disposal, pollution control and the like. They shall also
comply with industrial and labour laws as may be locally applicable.
3. The SEZ should have a minimum area of 1000 hectares and at least 25 % of the area
is to be earmarked for developing industrial area for setting up of units.
4. Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will be an
integral part of SEZs.
Who can set up SEZ?

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www.google.com
Fig. 10.4 : Set up of SEZ
The major incentives and facilities available to SEZ developers include :

 Exemption from customs/excise duties for development of SEZs for authorized

operations approved by the BOA.
 Exemption from Minimum Alternate Tax (MAT) under Section 115 JB of the
Income Tax Act. (withdrawn w.e.f. 1.4.2012)
 Exemption from Dividend Distribution Tax (DDT) under Section 115O of the
Income Tax Act.(withdrawn w.e.f. 1.6.2011)
 Exemption from Central Sales Tax (CST)
 Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

The geographical dispersion of the SEZs is mainly limited to seven States, Andhra
Pradesh, Gujarat, Karnataka, Kerala, Maharashtra, Tamil Nadu and Telangana. These
States account for the nearly 75% of the SEZs established so far. Further, most of the
established SEZs, Particularly, IT/ ITES SEZs have come up in and around major urban
centres. The sectoral dispersion of the SEZs also indicates that manufacturing SEZs are
not markedly visible. With the availability of land becoming increasingly difficult, setting
up of multi product SEZ becomes more challenging as it required minimum 1000 hectares
of contiguous and vacant land. A total of 222 SEZs are exporting at present. Out of this
129 are IT/ITES, 23 Multi product and 70 other sector specific SEZs. There are a total of
4,643 units setup in the SEZs.

The overwhelming response to the SEZ scheme is evident from the flow of investment
and creation of additional employment in the country. SEZ scheme has generated tremendous
response amongst the investors, both in India and abroad, which is evident from the following
details of certain SEZs:
 Mundra Port and Special Economic Zone, Gujarat (Multi product SEZ).
 Wipro Limited, Andhra Pradesh (IT SEZ).

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 Hyderabad Gems Limited, Hyderabad (Gems and Jewellery SEZ).

 Maharashtra Airport Development Corporation Limited, Maharashtra (Multi
product SEZ).
 Divvy’s Laboratories Limited, Andhra Pradesh (Pharma SEZ).

Journey from EPZs to SEZs in India has witnessed several developments and failures
in terms of conception of EPZs, expansion of EPZs across India, conversion of EPZs into
SEZs in the light of various inefficiencies, its reintroduction under the ambit of new SEZ
Act, growth of SEZs establishment in India and further loosening its significance due to
imposition of Minimum Alternate Tax (MAT) and DDT.

FINANCIAL SUPPORT AVAILABLE TO SEZ AND EPZ IN INDIA:

Special Economic Zones (SEZ) are growth engines that can boost manufacturing, augment
exports and generate employment. There are various facilities and incentives offered to EPZ
and SEZ.
1. 100% Income Tax exemption on export income for SEZ units under Section 10AA of the
Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the
ploughed back export profit for next 5 years.
2. Exemption from Central Sales Tax, Exemption from Service Tax and Exemption from
State sales tax. These have now subsumed into GST and supplies to SEZs are zero rated
under IGST Act, 2017.
3. Exemption from customs/excise duties for development of SEZs for authorized
operations approved by the BOA.

100% Export Oriented Units (EOUs)

In the year 1981, the government of India introduced cent percent export oriented units in
order to have local advantage in production and to provide all facilities of free trade zone.
Those manufacturing units undertaking to export their entire production of goods and
services are called 100% EOUs. Such units may be set up under EOU scheme or EPZ
scheme. EOU is complementary to SEZ scheme. It has emerged as a dynamic policy
initiative facilitating the exporting community in task of increasing exports. Following are the
main objectives of 100% EOUs:
 To accelerate export
 Earn foreign exchange for the country
 Transfer of latest technologies
 To stimulate or attract foreign direct investment
 To generate employment opportunities
EOUs can be set up anywhere in India with reference to factors like sources of raw-materials
ports of exports etc. Units undertaking exports of their entire production can be set up under:
 Export Oriented Units Scheme (EOUs)

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NAAC Re-accredited Autonomous College, affiliated to Barkatullah University, Bhopal

 Export Processing Scheme (EPZs)

 Electronic Hardware Technology Park Scheme (EHTP)
 Software Technology Park Scheme (STP)
 Bio-Technology Park Scheme (BTP)

Incentives or Benefits offered to 100% EOU

a. Export oriented units mainly concentrates in engineering, chemicals, plastic, granites,
food processing etc. Such units are permitted to import raw-materials, spare parts, and
machineries without payment of import duty. They are freed from acquiring license
and the payment of excise duty for the procurement of indigenous capital goods and
components.
b. 100% EOUs need not to be located in FTZ. They may be located at any place and
may be of any size.
c. 100% EOU are given special concession such as 5 years tax holidays and two years
gestation period.
d. EOUs are meant to export the entire or 75% of their production and thereby contribute
to promote exports
e. Foreign equity is permissible in case of EOUs.

Thus EOU yields numerous benefits like accessible source of raw-material, ports for export,
hinterland facilities, availability of technological skills and so on. It exists to extend
industrial base and necessitate for longer area of land for the project. Several activities are
undertaken by EOU units:
a. Manufacturing, servicing, repairing, remaking, reconditioning, re-engineering etc.
b. Agriculture including agro-processing, aquaculture, animal husbandry, bio-
technology, flori-culture, poultry, sericulture etc.
c. Export of all products except goods mentioned as restricted and prohibited items of
export
d. Software units may carry out exports by using data-communication like one in the
form of physical exports including exports of professional services.

Following are the incentives offered to 100% Export Oriented Units

1. An EOU unit may export all kinds of goods and services except items that are
prohibited in ITC (HS). However export of gold jewellery, including partly processed
jewellery and articles containing gold of 8 carats and above upto a maximum limit of
22 carats only shall be permitted for imports and exports.

2. Export of Special Chemicals, Organisms, Materials, Equipment and Technologies

(SCOMET) shall be subject to fulfilment of the conditions indicated in ITC (HS).

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3. Procurement and supply of export promotion material like brochure / literature,

pamphlets, hoardings, catalogues, posters etc up to a maximum value limit of 1.5% of
FOB value of previous year’s exports shall also be allowed.

4. An EOU / EHTP/ STP/ BTP unit may import and / or procure, from DTA or bonded
warehouses in DTA / international exhibition held in India, all types of goods,
including capital goods, required for its activities, provided they are not prohibited
items of import in the ITC (HS) subject to conditions given at para (ii) & (iii) below.

5. State Trading regime shall not apply to EOU manufacturing units. However, in
respect of Chrome Ore/Chrome concentrate, State Trading Regime as stipulated in
export policy of these items, will be applicable to EOUs

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