The Hindu Business Line : Evolve non-countervailable export incentive schemes: Plan panel

THE Planning Commission has plumped for instituting non-countervailable export incentive schemes in the wake of the WTO members' frequent complaint and countervailing action against Indian exports.

In its mid-term appraisal (MTA) report of the Tenth Plan, recently approved by the Union Cabinet and which is to be placed before the National Development Council (NDC) for its final imprimatur, the Plan panel has observed that over the past few years, importing countries such as the European Union, the US and Canada have treated some of the export incentive schemes, such as duty entitlement pass book (DEPB) scheme, as subsidy practices and slapped countervailing duties on such imports from India. The other export incentive schemes include duty drawback scheme, advance licence scheme, duty-free replenishment certificate scheme and export promotion capital goods scheme (EPCG).

More specifically, rebate of duties on capital goods under the EPCG scheme as well as under other schemes of the Department of Commerce has been "targeted", as such rebate is treated as "an actionable subsidy" under the WTO dispensation.

Stating that the rule that makes the rebate of duties on capital goods countervailable is an "apparent flaw" in the WTO Agreement on Subsidies and Countervailing Measures (ASCM), the MTA report said the Commerce Department is pursuing the proposal to suitably amend the ASCM Agreement under the ongoing Doha Round of trade talks.

Under the WTO pact, duty drawback or substitution drawback schemes are non-actionable provided the payment is not in excess of the levies actually paid on inputs. Substitution drawback implies the use initially of domestic inputs and subsequent imports of the same inputs.

The duty drawback scheme of the Revenue Department has seldom been countervailed. But the DEPB scheme is being countervailed as the related certificates could be used to pay customs duty for any import and not necessarily imports of inputs used in the production of exported product. Absence of the requirement to import the very inputs makes the DEPB payments countervailable in terms of WTO rules.

Hence, the Plan panel has mooted the need to consider "suitable modification in the scheme to make in non-countervailable or better still to subsume it under the duty drawbacks scheme".

The report said in the wake of the strategic export promotion policies being designed to guide an aggressive export effort, it is important to broaden coverage to a large number of non-traditional items and markets, which are expanding faster than the world average.

Pointing out that the experience of the South-East Asian countries suggests that technology-intensive items would provide the much-needed momentum to the export onslaught, the MTA noted that India's export promotion policy had been broadly neutral in respect of technology upgradation, and not particularly focussed on specific areas of technological advantage.

Hence, the Plan panel calls for "a conscious choice to leapfrog from low and medium technology to high technology exports".

The employment-creating potential of export manufacturing must be fully exploited and manufacturing and its linkages with mining, electricity and construction could provide employment to relatively lower skilled and even unskilled workers from rural areas.

The MTA report favours the move to intensify autonomous action for introducing trade facilitation measures to reduce transaction costs and the time taken for customs clearance, for both import and export consignments, in order to make the industry more competitive.

The report particularly pleaded for reducing industrial tariffs to a maximum of 10 per cent within the next two years and an average, which is lower. The attainment of a current account surplus over the last three years suggests that tariff reductions could be carried out faster without posing any significant risk to the balance of payments.

The restructuring of the industry and its resultant export thrustsets the stage for lowering tariffs further. However, as far as agricultural products go, it would be "premature to bring them down even before the major industrialised countries have taken steps to reduce their subsidies and market access barriers".

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page