The Centre amended the foreign trade policy (FTP) to enable traders to claim export benefits even if payment is settled in the rupee. So far, export incentives were available only when the trade was settled in a foreign currency.
The amendments by the Directorate General of Foreign Trade (DGFT) came into force with immediate effect.
The development comes against the backdrop of the mechanism to settle international trade transactions in the rupee which was unveiled by the Reserve Bank of India (RBI) in July. Given the government’s push towards the internationalisation of the rupee, these policy amendments shall help ease international trade transactions in the domestic currency.
“The Government of India has made suitable amendments in the Foreign Trade Policy and Handbook of Procedures to allow for international trade settlement in Indian rupees (INR) i.e. invoicing, payment, and settlement of exports/imports in Indian rupees,” the department of commerce said in a statement.
These amendments will be applicable for goods imported for export, realisation of export proceeds under Advance Authorisation (AA), Duty-Free Import Authorisation (DFIA) schemes, and realisation of export proceeds under the Export Promotion Capital Goods (EPCG) scheme.
Exporters had earlier said that to do the costing for exports in domestic currency, they need clarity with regard to the applicability of export benefits. Besides, a lot of exporters who had imported under various schemes require clarification regarding the acceptance of export obligations in the rupee against imports made in a free foreign currency.
The RBI in July said that rupee trade was being allowed to promote growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in INR. According to the mechanism finalised by the RBI, banks of partner countries can approach authorised dealer (AD) banks in India for opening special rupee vostro accounts. The AD bank will then have to seek approval from the central bank with details of such an arrangement.