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REGISTERED NO. D. 221

The Gazette of India

EXTRAORDINARY

PART I—Section I

PUBLISHED BY AUTHORITY

No. 74] NEW DELHI, MONDAY, JULY 5, 1955/ASADHA 14, 1887

Separate paging is given to this Part in order that it may be filed as a separate compilation.

MINISTRY OF COMMERCE

RESOLUTION

SELECTIVITY IN EXPORT TRADE

New Delhi, the 5 th July, 1965

No. 6(l)/65-BOT.—In pursuance of the recommendation made by the Board of Trade at its 10th meeting, held in Ernakulam in November 1963. the Govern- ment of India in the Ministry of Commerce Set up a Committee to examine the manner in which a selective approach to export promotion could be evolved in order that competent and quality-conscious exporters working in co-operator. could specialise in export trade in particular commodities or with particular re- gions. The composition of the Committee was as follows:

Chairman

1. Shri A. Ramaswami Mudaliar.

Members

2. Dr-. P. S. Lokanathan, Director General, National Council of Applied Economic Research, New Delhi.

3. Shri B. N. Adarkar, Additional Secretary, Ministry of Finance. 4. Shri Govind Narain, Chairman. Minerals and Metals Trading Corpora- tion. New Delhi.

5. Shri H. D. Shourie,* Joint Secretary, Ministry of Commerce. •Until Shri Shourie left the Ministry to assume the Director-Generalship of the Indian Institute of Foreign Trade.

( 4 4 5)

Memb er-Secretary

6. Shri C. R. Krishnaswamy Rao Sahib, Joint Director, Ministry of Com- merce.

2. After detailed discussion, the Committee submitted a report to the Board of Trade, containing its recommendations regarding the adoption of the selectivity approach. The Committee's recommendations were fully discussed at a number of meetings of Export Promotion Councils, Commodity Boards and trade interests, and also at n meeting of the Export Promotion Councils and other Organisations, held in New Delhi and presided over by the Commerce Minister. Taking into account the views expressed at these meetings, the Committee considered the matter further and submitted a final report in which its¹ original recommendations were modified and amplified.

3. The Board of Trade, at its meeting held on the 14th June, 1965, considered the Committee's final report. The Board felt that the final report satisfactorily met the objections which had previously been raised, and that its implementation would go a long way in promoting exports. The Board strongly endorsed the Committee's recommendations.

4. A summary of the observations and recommendations of the Committee is contained in the annexure. Government are in full agreement with the Com- mittee's approach, and consider that It is of the greatest importance for the healthy and orderly development of our export trade that proper stress should bo laid on the question of the competence of exporting units. Government also consider that it is necessary that those exporting units which have shown the capacity and willingness to export in a purposeful and responsible manner should be given necessary encouragement and that any obstacles in their way should be removed. At the same time. Government have no intention to keep out small scale manu- facturers or new exporters from the field of export; it is necessary, however, that they should be sufficiently competent to under take exports on an appreciable scale and in a sustained manner. Against the background of this policy, Govern- ment generally accept all the conclusions and recommendations of the Com- mittee.

5. Government wish to place on record their appreciation of the very valuable work done by the Committee In preparing a concise report on the important sub- ject of selectivity in export trade and their studied recommendations and obser- vations.

ORDER

Ordered that the Resolution be published in the Gazette of India and a oopy thereof communicated to all concerned.

ANNEXTJHE

Summary of Observations and Recommendations

1. The need for Selectivity in the export sector has been brought into focus as a result of the country emerging as an exporter of a number of new manufactur- ed products. Many new exporters have entered the trade. This has brought certain dangers in its wake.

2. Export aids should be extended selectively only to those who have a genuine interest in export trade and the capacity to undertake it.

3. Our promotional policy should provide for the building up of a cadre of efficient business houses with the required qualifications and resources to under- take overseas trading in a large measure, in a sustained manner, and over a long period.

4. The Committee had framed its recommendations in such a way as to avoid any danger that the selectivity approach might involve an element of discrimina- tion, encourage vested interests, or inhibit the entry of fresh capital and talent into the export sector.

5. The recommendations have the folUrwing objectives, viz. (a) Encourage- ment for the formation of efficient marketing units; . (b) Grant of facilities for specialisation in export trading; (c) Avoidance of excessive arid unhealthy inter se competition; and (d) Maintenance of high standards of business ethics.

6. The present scheme of recognizing export houses, although it was based on a Selectivity approach, has not succeeded in ii.s principal objective of building up a specialised cadre of exporting concerns.

7. The Selectivity approach is also inherent in the requirement of registration under the various Export Promotion Schemes, However, the qualifications for re- gistration are not selective enough, and in many cases a single recognition covers too wide a range of goods.

8. The concept of Selectivity could best be applied over the export sector by categorising the ranks of exporters into a three-tier pattern; the registered ex- porters at xhe lowest level, export houses at the second level and the consortia of exporters at the highest level.

9. It would be convenient to distinguish between non-traditional export com- modities, for which incentives are generally granted, and traditional commodi- ties, for which generally there are no incentives.

10. The criteria for registration of exporters, for the grant of export incentives, should not only be more specific but also separate and distinct for each product or group of products.

11. The criteria should take into account the nature and scale of operations of the exporter, and his ability to deliver the goods.

12. For the purpose of registration, exporters may be categorised into the following four groups, applying to them the criteria shown after each:—•

(i) Industrial Units licensed under the Industries (Development and Re- gulation) Act, and registered non-scheduled industrial units. (Actual production and installed capacity).

(ii) Approved or registered small scale units. (Annual production in the immediate past).

(iii) Cottage and handicraft industrial units in the decentralised sector.

(The type and quality of goods produced and, to the extent this can be ascertained, the quantum of production).

(iv) The merchant-exporters. (Tie-up arrangements with producing units).

13. In addition, any or all of the following criteria may be taken into account, having regard to the category of the exporter: —

(a) Quantum of export turnover in a specified product or a broad group of related products. (While previous performance would be a desirable qualification, even newcomers who have no previous record of ex- ports could be considered for registration if they are found suitable in other respects).

(b) Quality specifications of the products including inspection and testing

facilities' available prior to export.

(c) Record of commercial disputes, if any, in which the exporter has been' concerned, and their settlement; general standing in trade (including bank references).

(d) Overseas channels of trade and customer servicing facilities.

14. The rules of registration should be formulated by the Export Promotion Council concerned for the different products (or broad groups of allied products) with reference to the nature of each product or group of products and the domes- tic and international trade practices that prevail in respect of the product or pro- ducts. The rules should be subject to Government approval.

15. In order to provide flexibility, It would be necessary to have separate rulea for a distinct product or group of products. In order, however, to avoid unpro- ductive paper work, it should nott be necessary to have separte rules for every individual product; a single registration should suffice for a broad group of simi- lar products, such as drugs. Under these rules, registration will be in respect of specific products or groups of allied products and there will be no omnibus regis- tration as at present.

16. Where an Export Promotion Council is concerned with a variety of articles, all registered exporters of a product or a broad group of allied products should be formed into a panel within the framework of the Council.

17. It may be desirable for an exporter to specialise in exports not only of a particular product or group of products but also in a particular market. Export Promotion Councils should encourage marketwise specialisation. In suitable cases, sub-panels may be created within the same commodity panels for dealing with different regions of the globe.

18. Each Panel or sub-panel should evolve its own Convention of Trading which may among other matters cover all or any of the following aspects: —

(a) Quality standards. (b) Export allotments, blobal or regional. (c) Agreements on delivery schedules, payment terms commission, packing

and after-sales service and other customer services.

(d) Specification of the range of brands to be handled by each exporter or

group of exporters wherever appropriate.

19. Where necessary, price regulation also may be resorted to, but with the approval of the Central Government,

20. Only such export transactions as conform to the Convention of Trading and are effected by registered exporters should qualify for the grant of import entitlements against their exports.

21. Any member of a Panel who consistently violates the Convention of Trad- ing should be subject to expulsion from the Panel.

22. The Panel should have the power to require its members to file particulars of their export contracts for scrutiny by such authority as it may nominate in consultation with the Government.

23. Apart from import entitlements, competent registered exporters, selected on the basis of their performance, may be assisted by Government in other ways to enable them to overcome difficulties in production, improve their standards, and increase their exports on a- planned basis wherever possible.

24. In the case of traditional commodities, where trade had developed on sound lines and is proceeding satisfactorily, no particular action would be neces- sary. If, however, unhealthy practices are found to develop suitable action should be taken. The exact corrective measures required would depend on the nature of the commodity, the trading practices that have developed and the cir- cumstances demanding intervention. Broadly speaking-, observance of all or any of the following requirements might be necessary.

(a) Registration of exporters on the basis of well-defined criteria. (b) Fixation of minimum and maximum prices. (c) Quantitywise limitation on exports and fixation of quotas. (d) Registration of export contracts; (e) Pre-shipment inspection and quality control; (f) Regulation of trading practices such as prohibition of consignment

sales, etc.

Where the necessary regulation cannot be achieved through existing enact- ments, it may be necessary to resort to direct export control, under the Imports and Exports (Control) Act and the Exports (Control) Order.

25. In the case of those "traditional" export commodities which are however eligible for export incentives, the procedure suggested for non-traditional com- modities could be applied wherever circumstances so warrant.

Export Houses

26. The present scheme of recognition of Export Houses has not by and lar^e achieved the success expected of it. It should be revised on the lines indi- cated below.

27. As at present, only companies incorporated under the Companies Act, and Co-operative Marketing Societies or Federations registered under the appropriate law, should be eligible for recognition.

28. The competence, credit-worthiness and resources of the applicant body- should be taken into account for the purpose of recognition.

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29. The scheme of recognition of Export Houses should be re-oriented to make it more specific with reference to commodities. There are some advantages in confining recognition with reference to specific markets as well, but this may not be inaited upon, as undue dependence on a particular market may not be desirable.

30. There are already well-established merchant houses for export of tradi- tional commodities to traditional markets, and there is no need to accord recog- nition to export houses in such cases.

31. Only business houses of standing and possessing the following qualifications should be eligible for recognition:

(a) Substantial experience in handling the commodities in question for

export generally, and preferably to the selected markets, and

(b) In the case of manufacturing concerns, the exports should normally constitute a substantial portion of their production; this condition could be relaxed in cases where the actual quantum of production available for export is substantial even if it does not form a high proportion of the total production. In the case of trading concerns, export turnover should constitute a substantial proportion of total turnover.

32. Recognition should be accorded in the first instance for a limited and specified period, say three years. Renewal of recognition should depend upon good performance and may in deserving cases be for periods of upto 10 years at a time.

33. Recognition may be withdrawn if the Export House fails to maintain high standards 01 integrity and business ethics in its trading operations.

34. The facilities and concession at present admissible to the Export Houses should be continued. Further, each Export House should be required to draw up a detailed export programme in consultation with the Government immediately after recognition has been accorded. While approving the programmes. Gov- ernment should be prepared to indicate in advance the assistance that would be accorded to the Export House on the successful completion of the programme.

35. Business concerns which have already been recognised as Export Houses under the present scheme may be given a reasonable time to organise their acti- vities so as to conform to the above pattern, failing which recognition may be withdrawn.

Consortia oj Exporters

36. Consortia of Exporters, composed of all or a group of exporters in a single commodity or batch of commodities, may be formed for the sale of identical or complementary products.

37 Wherever exporters show the necessary discipline and sense of unity re- quired for the formation of such consortia it would be desirable for Government to assist in their establishment financially or otherwise as may be necessary,

38. Such consortia would be of special advantage in those where the trade has to deal with Monopoly Purchasers or where foreign buyers have organised them- selves for joint purchases. Consortia could cover both traditional and non-tradi- tional export commodities.

x u?⁹' Membership of the Consortia should be as wide as possible and an eaui- table scheme of allocation of business should be drawn up in advance.

General

40. The Committee commends the proposal that each Export Promotion Council will prepare lists of exporters/producers of products coming within its scope classified as below:—

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(1) Selected competent e x p o r t e rs w ho h a ve achieved a specified m i n i m um

export of a sizeable amount.

(2) M e d i um a nd small scale exporters w ho h a ve developed a p a r t i c u l ar b r a nd or quality of goods w i th export potentialities. PH™ c i u ar (3) L a r ge producing units w h i ch can export b ut which do n ot h a ve a p p r e-

ciable exports at present.

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In making out the lists the Export Promotion Councils Commodity Boards will include also suitable exporters/producers who are not as yet registered with them but who have potentialities of export. Government will take ateps for encourage- ment of compe.ent units by helping to remove difficulties in production, improv- ing quality and promoting exports.

41. The Committee's recommendations would have to be supplemented by suitable action in other directions. The Committee has placed great emphasis on the need for effective pre-shipment inspection and quality control.

D. S. JOSHI, Secy.

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NEW DELHI AND PUBLISHED BY THE MANAGER OF PUBLICATIONS, DELHI, 1 9 65