New Delhi, April 11 : The spectre of rising inflation cast its shadow on the foreign trade policy (FTP), with the Centre today using the unveiling of the annual supplement to announce a ban on cement exports and removal of incentives for steel exports.

The policy coincided with the release of government data on prices that put the inflation at a 40-month high of 7.41 per cent fuelled by among other things a 5.6 per cent rise in steel prices during the week ended March 29. “We have to ensure that inflation does not happen at the cost of exports,” commerce & industry minister Kamal Nath said, clarifying that domestic availability of goods would get precedence over anything else.

“To curb inflation in essential commodities, the government has banned the export of non-basmati rice, edible oils and pulses. Benefits of the DEPB (Duty Entitlement Passbook) scheme have been withdrawn on the export of rice, cement and primary steel items. We are also withdrawing the incentives under promotion schemes on the export of cement and primary steel items,” he said.

The minister’s FTP speech outlined the steps the government will take to encourage exports in fiscal 2008-09. The government announces measures every year as supplements to the five-yearly FTP. The present policy was announced in 2004 and today’s measures marked the end of the current series. To help cushion exporters from the strengthening rupee, the government extended by another year the interest subsidies given to them in sectors affected by the appreciation, as well as to small & medium enterprises.

The Centre also announced more sops to boost shipments of fruits & vegetables by giving exporters additional duty credit scrip of 2.5 per cent over and above the normal benefit available under the Vishesh Krishi Gram Upaj Yojna. This would be restricted to specific varieties of these items.

Among the other highlights of the FTP were an extension of income-tax benefits to export-oriented units by another year beyond March 31, 2009 and extension of the popular DEPB scheme until May 2009.

Nath said that an average growth of 23 per cent in exports over the last four years has given him the confidence to aim for an ambitious target of $200 billion for 2008-09. While the target of $160 billion for the last fiscal could not be met in the wake of a sharp rupee appreciation and slowdown in the US economy, exports managed to reach $155 billion in 2007-08. “Our total merchandise trade — exports and imports together — will be almost $400 billion this year, accounting for nearly 1.5 per cent of world trade. The remarkable achievements ... gives me the confidence to spell out an even more ambitious target — that of achieving a 5 per cent share in world trade by the year 2020,” he said.

The government also set up an Export Promotion Council (EPC) for the telecom sector to provide support to exporters in the industry. “The new EPC will provide institutional support to exports from the telecom sector,” Nath said. Exports from the telecom sector are likely to go up from Rs 1,800 crore to Rs 4,000 crore in the current financial year, he said, adding that “this (exports) is likely to exceed Rs 10,000 crore by 2011.”

2-pronged attack on rupee, price rise

•Export target for 2008-09 fixed at $200 billion

•Income tax benefit to EOUs extended till 2010

•Customs duty cut under EPCG scheme reduced from 5% to 3%

•Additional incentives for export of toys, sports goods

•Interest relief scheme extended by a year

•DEPB scheme for exporters extended till May 2009

•Focus market scheme extended to 10 more countries

•Exporters to get 6% interest on delayed tax refunds