Remove the value cap on exports by courier for an SME trade boom
4 min read . Updated: 12 Mar 2023, 11:34 PM IST
PremiumIndia’s denial of speedy air-freight services to exports worth over ₹5 lakh has restricted the export prospects of Indian SMEs.
India has a high growth potential at a time when many of its key export markets are facing an economic slowdown. The International Monetary Fund (IMF) has predicted that by 2027, India will be the world’s fourth largest economy, with a gross domestic product (GDP) of about $5.53 trillion. To reach this target, there is a need to reduce logistics costs and time and achieve exponential growth in both domestic and international trade.
Acknowledging this, many measures have already been taken by the government to support growth and trade. The path-breaking reform of a single goods and services tax (GST), along with schemes like the production-linked incentive programme, a close focus on the country’s logistics sector under the PM Gati Shakti National Master Plan for Multi-modal Connectivity and the National Logistics Policy of 2022, apart from trade agreements with key export markets and government support for onboarding small and medium enterprises (SMEs) to digital platforms, are all expected to deliver a manifold increase in India’s exports and fast-track our integration in global value chains to make the country atmanirbhar or self-dependent.
Yet, India’s share in global exports is less than 2% and the country is struggling to meet export targets of $1 trillion of goods and services each by 2030. This is because of certain restrictions faced by exporters, especially SME exporters, which account for around half our exports. Among them is the lack of SME integration in global value chains. Another is a big barrier they face while using the most efficient mode of quick cargo movement: express delivery services.
While India’s forthcoming Foreign Trade Policy may have a chapter dedicated to facilitating the integration of SMEs in global value chains, India is probably the only country which has a value limit of ₹5 lakh on exports of goods through courier/express mode. This adversely impacts the ability of our SMEs in high-value sectors like gems and jewellery, handicrafts, electronics and auto component goods to use express delivery services (EDS) for faster door-to-door delivery of goods and samples at reasonable cost.
Most clients of the express industry are SMEs. While integrating SMEs in global value chains is a priority on the country’s agenda during its G20 presidency, our own SME exporters are losing out on an opportunity to use expedited delivery, due to the export value limit. High-value shipments are now exported through the general cargo mode, which causes delays.
While time and again this restriction of value has been raised by service providers and users, the main issue is that the limit is notified in the Foreign Trade Policy and is also part of India’s outdated courier regulation. The express delivery sector is regulated by the Courier Imports and Exports (Electronics Clearance) Regulation, 2010, which replaced the Courier Imports and Exports (Clearance) Regulation, 1998. In the year 1998, when the first courier regulation came into force, the clearance of courier goods was being done manually at air passenger terminals.
Over the last 25 years, India’s express delivery industry has made substantial investments in infrastructure and IT systems and has worked with Customs authorities to streamline the set-up and processes. From 2018 onwards, courier exports have been done via the Express Cargo Clearance System (ECCS), which is a robust IT-based risk management system. The Customs clearance of express/courier shipments has moved from passenger terminals to dedicated express terminals. Yet, the value restriction continues, as the 2010 Courier Imports and Exports (Electronics Clearance) Regulation has not been modified to reflect these developments.
There is therefore an urgent need to review the 2010 Courier Imports and Exports (Electronics Clearance) Regulation, and align it with the demands of modernization in general and with our upgraded infrastructure and global best practices in particular.
With e-commerce recording double-digit growth in recent years, both globally and in India, it is now a necessity for our SMEs to use this platform. There is growing global demand for Indian ethnic and cultural products. The government is also promoting such products in global markets. However, can designers from Varanasi, weavers from Kanchipuram or the exporters of Moradabad brass statues or Tanjore paintings cater to global consumers with a restriction of ₹5 lakh on courier-delivered exports?
Our exporters are competing with exporters from countries like Malaysia, Vietnam, China or Thailand in global markets. They should have a level playing field as these countries do not have any value limits on exports. Indian exporters should have the right to choose between express and general cargo, irrespective of policy restrictions. To ensure this, the value limit, as notified under the Foreign Trade Policy, should be removed, and then Customs can notify this change under the country’s courier regulation.
As a first step, the forthcoming Foreign Trade Policy (April 2024), which is likely to focus on enhancing exports and linking SMEs to global value chains through e-commerce platforms, may examine the adverse implication of value limits on exports through the courier mode, and push for their removal.
These are the author’s personal views.