New Delhi: Twenty-five years after then commerce minister P. Chidambaram did away with quantitative restrictions on limits and replaced the office of the Chief Controller of Imports and Exports (CCI&E) with the Directorate General of Foreign Trade (DGFT) as part of the economic liberalization process, the National Democratic Alliance government is now set to review the relevance of the DGFT.
The government believes that most of the DGFT’s functions could be automated or delegated to the customs department. The commerce ministry has invited bids from global consulting firms for a “white paper on functions of DGFT” to study global best practices and assess how the structure and scope of DGFT could be made more relevant.
Attached to the commerce ministry, the DGFT’s role has evolved into promotion and facilitation of exports and imports from regulation of foreign trade under the erstwhile CCI&E.
“One of the ways of looking and facilitating trade is to have a look at the role of the DGFT in the new globalized world. It is therefore, proposed that Ministry of Commerce undertake a review of the functioning of DGFT, for which a study is proposed to be conducted through one of the reputed consultants who have global presence to give us a deeper insight into how the other major trading countries conduct their foreign trade, and draw suitable lessons for the way forward in India,” a request for proposals document posted on commerce ministry website said.
A ministry official, speaking on condition of anonymity, said the idea is to review the performance of the DGFT at a time when the government is moving towards electronic enablement and ease of doing business.
“Reorganizing the human resources of the ministry is also part of the review. We are also reviewing the role of our plantation and procurement wings,” the official added.
India is in the process of signing the Trade Facilitation Agreement under the World Trade Organization, which will require it to make customs rules easier for import of goods, further reducing the burden on the DGFT.
The study will also look into the adequacy of the Foreign Trade Policy (FTP) shepherded by the DGFT in its current form in meeting the policy and regulatory objectives of increasing the exports of goods and services from India and explore alternative mechanisms of transferring incentives directly through a Direct Transfer Scheme.
The commerce ministry also wants the consultant to study whether an organization like the DGFT, which facilitates formulation of the FTP, is also required to implement the export promotion schemes of the FTP or should the job be delegated to customs offices.
The study is expected to suggest ways to reform these arrangements and prepare a road map for transition. The terms of reference for the consultant includes “the issue of whether an organization like DGFT is required by India in view of the above analysis to fulfil the optimal prudent policy and regulatory goals and objectives related to trade facilitation”.
Biswajit Dhar, professor of economics at the Jawaharlal Nehru University, said such reviews should be done on a regular basis, but insisted it should have been conducted through inter-ministerial consultation rather than hiring an external agency. “DGFT still does substantial work on trade policy front. Hope they will not throw the baby with the bath water,” Dhar added.
Dhar said a model that the commerce ministry could look at is the one followed by the US government, where the US Trade Representative negotiates bilateral and multilateral trade deals, while the US International Trade Commission examines the impact of imports on US industries and directs actions against unfair trade practices.
T.N.C. Rajagopalan, independent trade analyst, said the DGFT is still relevant in the Indian context, but the work of its regional offices could be delegated to customs offices.