Nov 24, 2012

e-BRC, one small step for trade, one giant leap for the tradekind

Electronic Bank Realization Certificate (e-BRC) is an initiative towards trade facilitation. It was introduced in the current foreign trade policy (FTP) this year. You can read the detailed circular on e-BRC here
As the blog is for general public, let me clarify a few things. One of the objectives of FTP is to provide incentives for increasing foreign trade of India in desired direction. Trade facilitation is another objective. Most of the incentive schemes need proof of conducting foreign trade (say exports), and that the foreign trade proceeds were 'actually' realized. (Ok, in simple English, to take incentives under FTP, one needs to prove that he exported, and got the money back for it.) The physical part of movement is captured by what we call as shipping bill, and the money movement part is captured by, to keep it simple, a bank realization certificate, which the banker issues after the proceeds are realized. More about these things here.

Incentives are given after physical verification of these two documents and after matching the details therein. DGFT is the organization that does this work. And it's a mundane, manual work. Lakhs of shipping bills are verified against lakhs of physical BRCs. It was a case fit for automation. Customs had already moved on to e-shipping bills. The banks were a challenge. There are multiple banks, and to get all of them on board, to comply with the laid down formats, was a big effort. I realized the magnitude of effort only when I spoke to the in-charge of the team that developed the system. It has been done now, with the highest level of coordination between DGFT, MoF, Banks and RBI. Of course, the system is developed by NIC! For once, I must appreciate them for this one. The 'FAQs' and the 'Help' actually helps by using some common English. That itself is a change. See here in the link, under ECOM (read me first)

The advantages of doing this are many. One, it removes the huge workload on the DGFT organization, of physically verifying details on two sets of documents. Two, the transaction cost involved for traders, to go to the bank to get the physical BRCs, is eliminated. The cost of getting each BRC was (unofficially) between Rs 400 to Rs 1500 per BRC. Three, Banks were employing personnel to cater to this specific function of generating BRCs for the clients. This overhead is now reduced and the resource can be deployed elsewhere. Fourth, it drastically reduces the processing time, as what could take days, would now be done instantly. Lastly, it removes transaction costs of trading community of making visits to DGFT offices and trying to push the files faster. 

Paperwork has hidden transaction costs in terms of monetary and time penalties. Easing paperwork through automation, especially the ones that involve straightforward filing or checking of numbers, should be taken up on a mission mode. In years to come, I envision many such moves that would totally eliminate the need of paperwork (using trees) in international trade. The trickle has started. ICEgate of Customs and DGFT's E-initiatives are on the forefront for trading community. Banks have now hopped on-board. The blog welcomes the change.