MSME body seeks green channel for e-commerce exports

The Federation of Indian Micro and Small & Medium Enterprises (FISME) has urged the government to set up a green channel on lines of China to facilitate E-Commerce exports.

The Federation of Indian Micro and Small & Medium Enterprises (FISME) has urged the Union government to set up a green channel like China to facilitate e-commerce exports.

“A green channel for e-commerce exports with easier documentation and customs process simplification for timely delivery must be formed on lines of China, one of the biggest e-commerce exporters, to help streamline the process in India,” said Anil Bhardwaj, secretary general of the association, while speaking with Moneycontrol at the launch of FISME report titled ‘Expanding India's e-commerce exports with a focus on SMEs’.

According to Bhardwaj, the process currently takes anywhere between seven days and a month. “There are only about 8-10 foreign post offices in the country in big metros which send out shipments, which is another hassle,” he added.

A bulk of MSME orders are shipped internationally via post.

However, Bhardwaj says, China has been able to streamline its process in a way that it is only a matter of minutes for shipments to go out there.

“A task force needs to be made to only work towards streamlining the whole process, from packaging of products to shipment,” Bhardwaj said.

The Foreign Trade Policy 2023, released on March 31 this year has laid special emphasis on giving a fillip to e-commerce exports and MSME exports and pegged its export potential at $200-300 billion by 2030.

However, as per the FISME, “A huge gap exists between these estimates and the actual situation and requires concerted action on the part of exporters, platform owners and the government.”

Also read: India FTP gives boost to e-commerce exports

Currently, e-commerce exports account for only $2 billion, less than 0.5 percent of the country's total goods export basket.

“Documentation challenges are high. While the list of mandatory documents required by customs is three or four, the actual number of documents we have to supply is higher (about 10 to 12),” the report reads.

MSMEs exporting via e-commerce portals among other issues also have to deal with online exports facing high return rates as customers are unable to examine products beforehand. Bhardwaj explained that at present, even returns are treated as imports because of problems in identifying the returned product as the originally exported product and thus is subject to full import duties.

Citing best practices, he said, “Companies like ‘Returns USA’ provide returns management and reverse logistics services, which can be taken up in India as well to support the industry.”

Payment reconciliation should be simplified, extended

Lack of digital maturity in SMEs, complex documentation and regulation processes, payment problems, product returns as well as logistical problems are stumbling blocks for the industry.

“While the world has moved ahead with payments coming in various ways including via cards and online systems, payments reconciliation continues to be extremely complicated and acts as a major roadblock for third-party e-commerce exporters,” Bhardwaj said.

Payment reconciliation is an accounting process that verifies account balances to ensure all sets of records are true, consistent, and up-to-date.

All SMEs exporting via e-commerce channels are required to file payment reconciliations every six months as per current norms. FISME says this period should be extended to one year.

The body has suggested that banks, customs and the Reserve Bank of India (RBI) sit together and form norms for special facilitative mechanisms on cross-border payments, especially with respect to the closure procedure at banks.

Separate e-commerce policy needed

A report released by economic think tank Global Trade Research Initiative (GTRI) in March this year, also highlighted the potential of the e- commerce sector and said that India should target $350 billion worth of goods export through e-commerce by 2030.

“As the needs of the e-commerce export sector are vastly different from the regular export sector, the e-commerce export policy should be an independent document addressing all pain points faced by exporters,” the report read.

It added that apart from the RBI and customs, this policy should be jointly framed with the Directorate General of Foreign Trade after making necessary changes to their regulations.

It however pointed out that for that, the government needs to address the problems the sector faces by taking steps like formulating a separate policy along the lines of those in countries including China, South Korea, Japan and Vietnam.

The policy, according to GTRI, must include redefining responsibilities of sellers, simplifying payment reconciliation and processes along with setting up of a National Trade Network for the medium.

What has the government done?

The ministry of MSME has established 52 export facilitation centres across the country with an aim to provide requisite mentoring and handholding to MSEs in exporting their products and services.

A total of 102 enterprise development centres (EDCs) have been setup “with the aim to build a network of entrepreneurial leaders by providing professional mentoring and handholding support services to existing as well as aspiring MSMEs with special focus on rural enterprises on continuous basis”, said a ministry statement.

These EDCs act as “one-stop-shops” and provide services under components including awareness, incubation, enterprise facilitation, etc.

The ministry is also implementing an international cooperation scheme for enhancing the marketability of products and services in the MSME sector by facilitating visits or participation of MSMEs in international exhibitions and trade fairs, buyer-seller meets abroad.

A cluster development programme is being implemented by office of the development commissioner (MSME) to boost the productivity and competitiveness as well as capacity building of micro and small enterprises to increase demand.

The ministry of commerce has also established a process to address the concerns of returns for jewellery items, which are now counted as returns that do not attract import duties. This also provides a basis for establishing similar facilitative procedures for other e-commerce exports items.