What is the canalized list?
Several items like urea are canalized — they can be imported only by designated agencies like MMTC and STC,
the government's trading arms. Gold in bulk, for example, can be imported only by specified banks. Earlier,
items like sugar, edible oil, wheat and rice were imported by the government through canalizing agencies.
However, ongoing liberalization has led to many of them becoming freely importable.

What are the current export promotion schemes?
The government has devised many schemes to provide incentives to exporters and encourage them to compete
globally. Essentially, this was done by enabling them to import raw materials free of duty. Advance Licensing,
Export Promotion Capital Goods (EPCG) scheme, SIL and the Duty Exemption Pass Book (DEPB) are among
such incentive schemes. They schemes were attractive when the customs duty levels were high, but they are
losing their sheen in view of the falling import duties.

What is DEPB scheme?
The Duty Exemption Pass Book (DEPB) Scheme is a modified version of the advance license concept. Under
advance licences, exporters ship their goods and obtain a licence to import raw materials necessary for
manufacturing the shipped goods. The volume of imports is controlled through input-output norms that specify
the import entitlement on the basis of the quantum of exports. The DEPB Scheme permits accumulation of
entitlement points each time an export shipment is made. The difference with advanced licensing is that the
exporter can utilize the entitlement to pay customs duty not only on the inputs used but also for other items.
Also the entitlement can be sold.

What is EPCG?
The EPCG scheme allows exporters to import machinery duty free or at concessional duty if the importer
agrees to achieve a fixed export target within a specified time. The scheme was very popular when customs
duty on capital goods was high. Currently under the EPCG scheme, import of capital goods carry 10% customs
duty though duty free imports are also permitted, subject to a minimum import volume. Exemptions are
available for certain sectors like farming and garments even if the minimum threshold is not met.

What is Special Import Licence?
THE special import licence (SIL) is an incentive given to exporters to import goods that are otherwise
restricted, subject to payment of normal customs duties. This licence is freely transferable. The SIL benefit is
provided under two schemes.

First, the scheme of Export & Trading Houses. These are units recognized by the office of the DGFT (Director
General of Foreign Trade) on the basis of their export performance. The second scheme covers exporters who
have directly exported goods worth Rs 5 crore and above during the preceding licensing year or an average of
Rs 2 crore and above during each of the preceding three licensing years.

While Export & Trading Houses are entitled for a SIL ranging between 6 per cent and 12 per cent on FOB (free
on board, or cost of the goods at the point of shipment) basis and 7.5 per cent and 15 per cent on NFE (net
foreign exchange earning) basis, the other exporters are issued SIL at the rate of 4 per cent.

What is a Replenishment License?
The idea of a replenishment licence is to make available inputs, that have gone into goods which have been
exported. Earlier, Replenishment Licences were being given under the Advance Licensing Scheme, a practice
discontinued during the last couple of years with exporters now having to ship the goods out first. Now, only
exporters of gems and jewellery are eligible for grant of replenishment licences to import and replenish their
inputs at a specified rate.