Karnataka Export Promotion Policy                                                                  

                                                                      (2002-2007)

                                                                      I PREAMBLE:

 1.  The ongoing process of opening up the Indian economy, changing Industrial and trade policies over the last decade and the formation of WTO have together given rise to stiff challenges as well as tremendous opportunities, for Indian Industry. While the challenges are  the  result  of liberalized imports of raw materials, components and finished products from across the globe in an  increasingly  reducing  tariff  regime,  the opportunities arise from the opening up of the world markets for Indian Industry.

 2.  The  Govt, of  India  has  in  the  recent  past,  initiated a number of measures  to promote exports of both primary and manufactured products as also services.  Allocation  of  funds for export development by States, Export Promotion Industrial Park  Scheme, Critical  Infrastructure  Balance  Scheme,   Export  Intensive   Area Scheme, Market Development Scheme and setting up of Special Economic Zones, in important   locations   are  some of the initiatives taken by the Govt. Of India. The recent ASIDE (Assistance to States for Infrastructure Development  and   Allied  Activities) programme merges most of these initiatives of the Govt. Of India under one head. Assistance under ASIDE  can  be  utilized  by  the  State for development of infrastructure related to promotion of exports. Assistance under the scheme can  also be used for EPIP and Special Economic Zone projects. Allocation to the States under ASIDE is  linked  to  export  performance  of  the  State.  The state level Export Promotion Committee has been empowered to sanction  schemes under ASIDE. It is, therefore, necessary that the State fully utilize the opportunities that are thrown open by the initiatives if the Govt. Of  India and formulates a comprehensive policy and appropriate strategies for promoting exported from the State,

 3. Karnataka has a long tradition of  overseas trade. Historically, Karnataka has been a major exporter of commodities like Coffee, Spices, Silk, Cashew nuts, Handicrafts and Agarbathies.  In  the last two decades the State has emerged as a major player in the export  of  Engineer  goods,  Ready   made Garments, Leather  Goods, Chemicals, Minerals and Ores etc. Since second half of the 1990's, Karnataka  has  caved  out  a  niche, for  itself  in  the  global  market place as the knowledge and technology capital of the Country.   The  State  has   made  rapid  and  spectacular  strides in the new economy. Information Technology, Bio-Technology and State of  the  art  Research  and  Development  Institutions have given Karnataka a pride of place as a frontier knowledge State in India. Indeed Karnataka has merged as a leader in the new economy in this part of the World.

 4. India's Merchandise exports during 2001-02 added up to Rs.2,10010crores (US$ 43.99 billion)*, whereas Karnataka's total exports during the year 2001-02  were  over  Rs.20,000crores. (US$ 4.12 billion) (Provisional)** During the 9^th Five Year Plan period (1997-2002) Karnataka  achieved  remarkable  growth  in  exports  growing  from Rs.8432crores in 1997-1998 to over Rs.20,000crores in the year 2001-02. The average annual growth rate has been about 15%, Percentage share of Karnataka in India's export today stands at about 7%.

* Source: Directorate General of Commercial Intelligence and Statistics, Dept. of Commerce Government of India.

** Source: DGCI & S

 Details of Karnataka's export for last 3 years are:

 6.      The  twin  forces  of  liberalization  of  Indian  economy  with  opening  up  of the Indian market and globalization i.e. greater integration of  the  Indian economy  with  the  global  economy, poses  several   challenges  as well as opportunities. The  entire  world today  is  one  market place. The  defining  principle  of   international  trade  today  is  competitiveness. The  future  of   exports   for   Karnataka   will   be   predicted   upon   an  intense  interplay  between  the  domestic  policy  environment  and the enormous  external  trading   opportunities.  Under  the  multilateral  trading  regime,  the  ability  of  the  State  to  seize the opportunities  that  are opening  up  in  the  global  market  will  be  driven primarily by the primacy of technology  in  domestic  industry,  price and quality competitiveness  and  achieving  global  standards  in  products  and  processes. The principles  of  National  Treatment and Most  Favored  Nation  governing  the  WTO  regime  will  require the domestic export community to aggressively compete with its counter parts in the rest of the world.

7.      The EXIM policy of the Govt. Of Indian provides a national policy framework. At the same time, the State Govt. Needs to provide focused facilitation  to  enable  rapid  growth  of  exports  from  Karnataka in  sectors  in  which  the State enjoys competitive advantages.  It  is  in  this  context  that  a policy framework to give impetus to establishing best practices, for capacity building and facilitating quality and competitiveness of domestic exporters becomes critical.                                                                             

II. MISSION                      

8.      Karnataka’s   mission  statement   on  exports  is  to  facilitate  the  rapid  and  sustained  growth  of exports from Karnataka’s  share  in  all  India  exports  from  the  present  level  of  70%  to 15% by 2007. This will be acheived by:        

     i)   Providing an effective, proactive and supportive Institutional  mechanism for the rapid growth of exports.

IV. STRATEGY

Thrust Sectors

       a) Agriculture and Process Food Products                                                                                                                 Karnataka is bestowed with 10 Agro-climatic  Zone  and  is capable of  growing  virtually and agri/horticultural products. The annual production of Horticultural crop is 12.4  million  tons an a  variety of vegetable, fruits, flowers, spices and  herbs are grown. 66% of the geographical areas  are  under agriculture  and   the area available for cultivation is 12.7 million hectares. The major crops include maize,  rice,  millet, sorghum, spices,  tobacco,  cotton,  coffee and tea etc. Exports of agricultural and  processed  food  products  for  the  year 2001-2002   is   Rs. 1549.35 Crores (US $ 32 millions). The  major contributing products  are  coffee,  cashew  and  cashew kernels, spices, fruits  and   vegetables (onions, mangoes, potatoes), processed foods (mango pulp) and marine products. In  the  recent  years,  export   of  vegetables  like gherkins, rose onions etc., and floriculture have gained significance. Export from this sector are expected to grow annually by 20%. 

        b) Readymade Garments                                                                                                                                     Readymade Garments sector enjoy a pride of place in Karnataka. At present, the  MFA  agreement with USA and countries in European  Union  has  resulted  in Quota  restrictions  in  these  countries.   With   the  phasing  out  of  MFA agreement and implementation  of  agreement  on  textiles  and  clothing  under  WTO  from  2005, this  sector  will  be  freed   from  quota restrictions  but  will  have  to  face  the  global  competition. To  equip  the exporting  industries  in this sector to face the changing trends in the international market, that  Ministry  of  Textiles, Govt. Of India have already set up  apparel training and  design  centers  in  various parts  of  the  country  to  equip  the  workers  with  latest  technology  in  the field and also obtain  hands-on  training. Exports of this sector during 2001-2002 is Rs.2820 Crores. (In addition,  there  is about Rs. 1300 crores of industries in Karnataka). (US & 58 millions direct exports) Exports from this sector is expected to grow annually by 30%.

         c) Electronics                                                                                                                                                            In the Electronics sector, a large number  of  exporting  industries are present in and around Bangalore  and in Mysore. Over 300 of the world’s leading electronics  companies  are  located  in  Karnataka. A substantial portion of  exports is to western markets. The products exported are industrial electronics, telecommunication  equipments  and  parts, consumer electronic, computer hardware, electronicmedical equipments, watches, transformers, control instrumentation, components, aerospace and defense electronics etc.  Exports  of  this  sector  during  2001-2002  is about Rs. 1602 crores. (US &33 millions) Exports from this sector are expected to grow annually by 30%.

       d) IT &  BT                                                                                                                                                       Bangalore is known as the Silicon Valley of India. State has the Software Technology Parks of India at Bangalore, Mysore and Mangalore. STPL, Hubli is under implementation. Over 1100 software companies registered with STPL’s account for Rs.9903 crores exports (US & 204 millions) during 2001-2002. North  America  accounts  for 69%  of  the  total  exports  in this sector followed by European countries at 29%. Exports from this sector are expected to grow annually by 40%.

       e) Engineering Goods                                                                                                                                                                                                A number of engineering exporters are based in Bangalore, Hubli, Mysore, Belgaum, Mangalore, Shimoga etc., In Karnataka. The products exported include Machine Tools,Industrial Machinery Small & Cutting Tools, Castings, Automotive components, Electrodes,Welding Equipments, Construction and Earthmoving Equipments, Helicopter  Spares, etc.  Exports  of this sector during 2001-2002 is Rs.1048 crores.(US & 22 millions) Exports from this sector are expected to grow annually by 20%.     

           f) Arts & Crafts                                                                                                                                             Karnataka has a rich variety of crafts, a considerable production  base and a vast pool of talented and skilled craftspersons. Training in production techniques, focus on contemporary design and upgradation of craft clusters will constitute initiatives to give impetus to handicrafts exports. This will be done through the Karnataka State Handicrafts Development Corporation, the NGOs, in the field and Export Promotion Council for Handicrafts. The effort will be to reach an export target of Rs.150crores in 2006-07 from the level of Rs.40crores in 2001-02.

            g) Mineral & Mineral Based Products.                                                                                                             The State has a very wide and varied mineral resource. Mineral resources are high-grade Iron Ore, Exotic Granites, Bauxite, etc. Export of Iron Ore and Minerals has been in the order  of  Rs.678crores to Rs.780 crores during the last three years. The State will aim to increase the export of minerals and  value  added  mineral  based  products. Efforts will be made to achieve exports of Rs.1000crores per annum of minerals and minerals based products in the next three years.

12      In collaboration with  the  sectoral  export  associations  and  in consultation with the related industry bodies, sectoral mid-term strategy will be commissioned to draw a  road map to achieve the sectoral targets envisaged.

13      Under the Govt. of India, 29  Export  Promotion  Councils  and Commodity Boards are engaged in export promotion of products coming under their jurisdiction. In  Karnataka, the Visvesvaraya Industrial Trade Center (VITC) a registered society functioning under the Directorate  of  Industries and Commerce is, at present, the Nodal Agency for promotion of Exports of all products from the State. VITC is regularly conducting Seminars / Workshops/ Training   Programmes related  to  exports, organizing/  participating   in   Trade Fairs/ Exhibitions  both  a  the  National  and  International  levels,  sponsoring  Trade Delegations  abroad, counseling exporters  resolving  grievances of exporters etc., and is working in close co-operation with FIEO, ITOP, Export  Promotion  Councils/  Commodity  Boards, Customs  and  other related Central  and State Govt. Depts./ Organizations to promote exports from the State. It  is  proposed to restructure VITC  as  Export Promotion Board of Karnataka which shall be the Nodal Agency to guide and provide assistance to exporters as well as  facilitate  in obtaining  clearances from regulatory Departments and resolving operational problems of exporters in Karnataka.

14. The following policy making empowered committees are functioning to facilitate the process of exports in the State.

15.       The following committee is functioning for resolving the operational problems of exporters.The Export Facilitation Co-ordination Committee, Central State inter departmental Committee chaired by the Chief Commissioner of Customs and Central Excise, Bangalore.

16.     In  order  to  promote exports from all districts in the State, District Level Exports Promotion Committee (DLEPC) will be setup. The functioning of DLEPCs will be monitored by the subcommittee of SLEPC chaired by Commissioner for Industrial Development & Director of Industries and Commerce, which also renders secretarial services to policy-making committees.

17.    The Dept. of Commerce, Ministry of Commerce and Industry, Govt. of India have  set a target of US $ 80.48 billion for the exporters in the country to be achieved by the year 2007, in order to reach 1% share of the  world trade. This policy aims at  Karnataka  achieving  an ambitious 15% share in the country’s exports by 2007, i.e.,  US $ 12.07  billion from the present level  of  Us$  3.45  billion exports achieved during 2000-01. To achieve this target, the  average compounded annual growth rate(CAGR) required is 24%. Following strategies have been formulated to achieve this target.

(a)    Exporters  in  Karnataka  are  mostly concentrated in few  districts, the  majority of them being located in  Bangalore. All   sections  of   exporters   have  their  export  association.  VITC  should  closely   and   actively  co-ordinate  with  all the export associations and take up the following measures.

         i)  Evolve  suitable  export  oriented  strategies  focusing  on specific  products  sectors with  inputs  from  the Export  Association/ Exporters. This will include taking part in international Trade Fairs/ Exhibitions, Providing inputs on technology upgradation, packaging, quality etc.

        ii)  Undertake  market  research  on  focus  countries,  markets  and  sectors  and  provide  market information to the exporting community

(b) For effective export promotion in the Districts, the industries and traders may be classified into three categories in each District, as given below:

The  DLEPC  will  draw  upon  an  expertise  of VITC in export promotion and chalk out a time bound and effective action plans to:

       a)  Identify  the  bottlenecks/ problems  faced  by  the  existing   exporters and resolve them. The exports will increase significantly in a short period with the creation of a suitable export-conducting environment.

       b) The Industries/ Traders who are exporting their products through other merchant exporters will be trained to export directly by giving them intensive training in exports, providing regular market information and other related information on a  regular  basis  from  VITC. Since  their  products  have  already  been  accepted in the overseas market, these Industries/ Traders are expected to become exporters within a short time and help in increasing exports significantly.

       c) After  the  DLEPC has  identified  the  potential  exporters  in  the  district,  VITC will in co-ordination with local DIC/ Chamber  Industry  Association  counsel  and  train the Industries/ Traders to export their products. This will be a long-term strategy.

      e) The Commissioner for Industrial Development, who is the  Chairman of the Sub-committee of SLEPC shall monitor the work of DLEPCs and ensure their effective functioning.

(f)    E-Government for International Trade                                                                                                               Since  many  Industries/  Traders  do   not  have  the  wherewithal to take up export activity due to lack of knowledge on the trade,  it  is  proposed  to  establish  E-Governance  facility  at  VITC,  Bangalore  and  connecting  six  major  Districts viz., Bangalore,  Mysore,  Mangalore, Belgaum, Bijapur  and  Hubli to start with, which would facilitate the existing and potential exporters in Bangalore and these districts to  have  online chatting/video conferencing with experts, concerned departments/organisations and obtain online  up  gradation  of  latest notifications, circulars, clarifying doubts/ questions related to exports, generate online trade enquires etc. at one single place without traveling.

(g)    VITC B2B  Exchange                           

To  capitalise  on  the  potential  for  exporting  through the  internet, it  is  proposed  to upgrade the existing VITC trade portal to a full-fledged B2B exchange, which would facilitate even the small and tiny unit in the State to take up online trading activity.

(h)    By Suitable adoption of the above measures and proper co-ordination of the concerned Depts./ Organisations with the exporting community, it is proposed to not only help the existing  exporters  of  the State to export more, but also motivate new entrants in the field.

The MDA Scheme of the State Govt. Shall focus on the small and medium manufacturing units who wish to enter export field and  small  merchant  exporters  of  the  State and would be administered by VITC. This scheme would include among others. Financial  support  for  visit  of Trade Delegations to other countries, participation in international Trade Fairs/ Exhibitions, Market Survey Reports, Publicity in foreign media etc. Initially an outlay of Rs.1.00crores per year will be provided under the Scheme.

A brand  equity fund with an allocation of Rs.1.00crore  per  year will be set up at VITC under the Scheme. This will be aimed at building strong globally competitive brands for products manufactured/ produce originating from Karnataka.

A  Market  Research  Fund with an allocation of Rs.1.00crore  per  year will  be set up at VITC to activate a mechanism to providing live and timely market information on products and markets which will help the SME exporters to enter the export market directly.

Priority will be given to the exporting units of the State to avail of the  facilities under Technology Upgradation Fund created under New Industrial Policy released in 2001.

VITC  on  behalf  of  Govt. of  Karnataka is awarded export awards to top exporters of the state for their excellence in exports. These awards will be in those sectors that are focus sectors for the State viz., IT, BT, Food Processing Engineering, Electronics  and  Communications, Garments  and  Machine  Tools. A one-time corpus fund of Rs.1.00crore will be set up for this purpose.

19. All  export-oriented  industries  will be eligible for  incentives  and concessions as detailed in Govt. Orders No.FD 161 CSL 2001 (2) dated 30^th  Nov.2001, FD 161  CET 2001  dated  30^th Nov.2001 and CI 167 SPI 2001 (P3) dated 24^th Sept. 2002. For the purpose  of  incentives  as  per  the  above  orders  a  unit  is  defined  as an “Export Oriented Unit” if it exports the minimum of 25% of its production in any  financial year. Incentives for units set up in Special Economic Zone will however be governed by the Special Economic Zone Policy as per the Government Order No.CI 282 SPI 2001 dated 25^th Feb. 2002.

20. Creating  good   infrastructural   facilities   in   potential export centres will receive utmost priority. Government will encourage participation  in  private sector  in   developing   export  infrastructure with a time bound implementation plan on suitable models like BOT, BOOT, BOST etc. In particular the following infrastructure will receive attention.

     At present, there  is  one  major Sea Port, the New Mangalore Port Trust at Mangalore, one minor Sea Port at Karwar, an inland Container  Depot  of  CONCOR   at   Bangalore  and  a  MSIL  Air  Cargo  Complex  at  Bangalore  Air  Port.  The  Central Warehousing  Corporation  have  set  up  2  Container  Freight  Stations at  Dharwad, Bagalkot, Mysore, Hassan, Karwar and Raichur which are at various stages of  implementation at present. In addition, few CFSc are also been set up in the private sector

It is Proposed to set up minor airports at Hubli, Mysore, Gulbarga and Bellary to start with, and minor Seaports in Malpe/ Moodabidri, D.K and Tadri, UK, to facilitate exports from the State.

Vide G.O. No. CI 94 SPI 2001 dated  19.04.2001. The  State Government had approved establishment of Special Economic Zone at Hassan. In order to boost the investors confidence in Special Economic Zone and to highlight the State Govt’s stand on issues relating to State Levis, generation and distribution of power, environmental clearances etc., the Government Vide G.O. No. CI  282  2001-dated  25^th  Feb.2002  as   formulated   a   State  Policy   for  Special  Economic  Zones  to govern the development, operation and management of Special Economic Zones and industrial units to be established therein.

Agri Export Zones for Gherkines  are  being  set up in Bangalore Urban, Bangalore Rural, Chitradurga, Dharwad, Bagalkot, Hassan, Tumkur and Kolar. Six  food-processing   parks  have been cleared by the Central Government in the State at Malur, Bagalkot, Chitradurga, Belgaum, Maddur and Jewargi.

g)  Assistance to States for Developing Export Infrastructure and other Allied Activities(ASIDE) Scheme

For the year 2002-03 in the tenth five year  plan,  Ministry  of commerce, govt. Of India has allocated Rs. 330 crores to the State Govt., Under a new  Scheme of  Assistance to  States   for  Developing Export Infrastructure and Allied Activities (ASIDE), based on their export performance.  For this purpose, the  shipping bill has been amended to incorporate a column for filling up information relating to 'State of Origin of goods'.  The  funds  will  be  distributed to other States based on the State figures complied by DGCI &S on this basis.  The "State of Origin of Goods for Karnataka is 84".  

This specific purpose for which the funds allocated under the scheme  can be sanctioned utilised are as follows:  

          i)    Creation of new Export Promotion Industrial Parks/Zones (including Special Economic Zones (SEZs) 

          ii)   Setting up of electronic and other related infrastructure in export conclave.

         iii)   Equity participation in infrastructure projects including the setting up of SEZs.

The   proposals  for  the  various  export infra structural projects required to be implemented for acceleration of exports & submitted by the DLEPC/ other concerned agencies will be scrutinized and cleared by State Level Export Promotion Committee(SLEPC) headed by the Chief Secretary of the State.

21) Deregulation of business environment is imperative to enable exporters to operate in the State with ease. With the objective of providing an efficient, responsive and transparent administrative frame work the following is envisaged.

a)  Visvesvaraya Industrial Trade Center(VITC)  shall be the Nodal Agency to guide & provide assistance to exporters as well as to facilitate clearances form regulatory  departments & resolve operational problems of exporters.

b)  Public Utility Status: The Govt. of Karnataka will review existing legislations to assign Public Utility Status to exporting units who satisfy eligibility criteria as per relevant statistics.

c)  Green Card:  In order to enable exporters having good track record to move their export/ import consignments freely without any hindrance from any of the Departments, the Govt. Shall issue them with green card facility, as per following criteria:

The Green Card would entitle the holder to minimum inspection and speedy clearance of all proposals  by all the Departments of the State Government.  A few of the areas where this can be of great help to Exporters are detailed below: