Amendments in Para 5.11 of the HBP in sync with RBI A.P.(DIR Series) Circular No.10 dated 11th July 2022

## Report on Amendments to Foreign Trade Policy 2015-2020 **1. Executive Summary:** This report analyzes amendments to the Foreign Trade Policy (FTP) 2015-2020, specifically focusing on changes introduced in Para 5.11 of the Handbook of Procedures (HBP) concerning the realization of export proceeds. The amendment, effective immediately from November 9, 2022, allows for invoicing, payment, and settlement of exports and imports in Indian Rupees (INR) under the Export Promotion Capital Goods (EPCG) Scheme, aligning with Reserve Bank of India (RBI) guidelines. This change aims to facilitate trade in INR and potentially reduce reliance on freely convertible currencies for certain transactions. The key stakeholders affected are exporters and importers utilizing the EPCG scheme and those engaged in trade with SEZ units and developers. **2. Introduction:** This report aims to provide an overview and analysis of recent amendments to the Foreign Trade Policy (FTP) 2015-2020. The analysis is based solely on the provided official notification concerning changes to Para 5.11 of the Handbook of Procedures (HBP) and its relation to RBI A.P. DIR Series Circular No. 10 dated 11th July 2022. **3. Policy Overview:** * **Original Policy:** Foreign Trade Policy 2015-2020 and Handbook of Procedures 2015-20. * **Core Objective(s):** * Facilitate export proceeds realization in freely convertible currency. * Specify the acceptable currency for export proceeds from SEZ units and Developers. * Permit invoicing, payment, and settlement of exports and imports in INR under EPCG Scheme **4. Background and Rationale:** The amendment to Para 5.11 appears to be driven by a need to accommodate and integrate the RBI's initiative to allow invoicing, payment, and settlement of exports and imports in INR under the EPCG scheme. This suggests a broader policy objective of promoting the use of the Indian Rupee in international trade, potentially reducing dependence on freely convertible currencies and mitigating exchange rate risks. The reference to the RBI circular indicates a coordinated effort between the Directorate General of Foreign Trade (DGFT) and the central bank to streamline trade procedures. **5. Key Provisions / Changes:** The amendment specifically modifies Para 5.11 of the HBP, focusing on the realization of export proceeds. The core change is: * **Specific Part Changed:** Para 5.11 of the Handbook of Procedures 2015-20, concerning the realization of export proceeds. * **New Rule/Provision:** The amended para now states: "Amendment in Para 5.11 of the HBP are notified, to permit the Invoicing, payment and settlement of exports and imports in INR for Export Proceeds under EPCG Scheme, in sync with RBIs A.P. DIR Series Circular No. 10 dated 11th July, 2022." * **Difference/Effect of the Change:** Previously, export proceeds were predominantly expected to be realized in freely convertible currencies. The amendment introduces the option to receive payment in INR for transactions falling under the EPCG scheme. The change permits the use of INR for invoicing, payment, and settlement. It broadens the scope of acceptable currencies for export transactions under the EPCG Scheme. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders for this amendment are: * **Exporters and Importers utilizing the EPCG Scheme:** These businesses can now leverage the option to conduct transactions in INR, potentially simplifying processes and reducing currency conversion costs. * **SEZ units and developers:** While the original policy already addressed them, the added flexibility of INR transactions might indirectly affect them, especially in relation to sourcing inputs and exporting finished goods. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Directorate General of Foreign Trade (DGFT) is responsible for implementing the amendment. The RBI plays a crucial role through its A.P. DIR Series Circular No. 10. * **Timelines/Procedures:** The amendment came into force with immediate effect on November 9, 2022. Specific procedures related to INR invoicing, payment, and settlement would likely be detailed in the referenced RBI circular and potentially in subsequent DGFT notifications. * **Amendment Specific Implementation:** The immediate need is to understand and implement the procedures outlined in RBI A.P. DIR Series Circular No. 10 to facilitate INR transactions under the EPCG scheme. Companies need to adapt their invoicing and payment systems to accommodate INR transactions. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes of this amendment include: * **Increased utilization of the Indian Rupee in international trade:** By allowing INR transactions under the EPCG scheme, the government aims to promote the rupee as a viable currency for trade settlement. * **Reduced reliance on freely convertible currencies:** This can potentially mitigate exchange rate risks for Indian exporters and importers. * **Simplified trade processes for EPCG beneficiaries:** Conducting transactions in INR could streamline documentation and reduce currency conversion costs. * **Positive impact on India's Balance of Payments:** By encouraging INR-denominated exports and imports, the amendment could contribute to a more favorable balance of payments. **9. Conclusion:** The amendment to Para 5.11 of the HBP marks a significant step towards promoting the use of the Indian Rupee in international trade. By permitting INR transactions under the EPCG scheme, the amendment offers greater flexibility to exporters and importers. The changes will likely contribute to reducing reliance on freely convertible currencies and simplifying trade processes. The immediate effect is the requirement for stakeholders to understand and implement the guidelines provided in the RBI's A.P. DIR Series Circular No. 10 to fully leverage the benefits of this amendment.

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