Simplify the Bonded Warehouse policy18 November 2020
IT is high time to simplify
the existing Bonded Warehouse (BWH) policy for export diversification
and reduction of dependency on a single sector, experts and businesses
During the Covid-19 situation, the nation saw the risk of dependency on a single sector because there was a sharp decline of total export earnings due to the cancellation of export orders in the ready-made garment (RMG) sector.
On an average, the RMG contributes more than 80 per cent in the country's export earnings, while all other export sectors contribute 20-23 per cent. In the year 2018-19, only $6.40 billion total export was $40.53 billion, of which non-RMG sector contributed. Similarly in 2019-20 FY, RMG earned $27.93 billion while the non-RMG $5.74 billion.
There are 4,000 RMG bonded warehouse licences compared with 200 licences for non-RMG categories. The message is more pronounced when among 1,600 items exported to the world market in FY 2018, 1,400 were in the non-RMG category. Only 250 of the export items that belonged to the RMG category were blessed with the bonded warehouse benefits, while the rest had to make do without the facility. That there is a pressing need for export diversification away from single item reliance is often talked about, but hardly acted upon in creating conditions and infrastructures congenial to the expansion of the export trade.
If the privilege of duty/tax exemption on raw materials/other inputs import under the bonded warehouse provision could also be extended to the rest, non-RMG exporters, the picture of our export basket would look not only more equitable but the income from the exports would also multiply significantly.
Also the delivery system of NBR, especially its relevant wing dealing with the bonded warehouse facility, is circumscribed by outmoded, mostly manual, paper-based operation, complex set of rules and redundant documentation process. It also has a systemic revenue leakage problem. So, it is hardly surprising that the present service delivery mechanism is not suited to meet the needs of the ever-growing number of prospective beneficiaries. That calls for modernising the delivery system in a time-befitting manner. The first step to that end would be to replace the existing primitive system with a smarter, automated one. The imperative is that the policymakers have to be more sensitive towards the emerging market needs.