Textiles, leather, auto, minerals and chemical exports will no longer get preferential tariffs

With the European Union (EU), India’s largest export market, withdrawing its preferential import duty scheme for some Indian products from 2014, the Commerce Ministry is considering fresh incentives to help these sectors retain their competitiveness.

“We are looking at some domestic schemes to help the affected sectors stay competitive in the EU market,” said a senior Commerce Ministry official, speaking to Business Line.

The products that are no longer eligible for lower tariffs under the preferential duty scheme are: textiles, chemicals, minerals, raw hides & leather and automobiles, including road vehicles, bicycles, aviation, space, boats and their parts.

Until now, the EU’s Generalised System of Preferences scheme provided duty-free or low-duty access to these products in all 27 of its member countries.

‘Globally competitive’

The affected products have “graduated out” of the scheme as they have become globally competitive. They will now attract normal import duties of 6-12 per cent.

“The EU is the biggest market for Indian products and losing the preferential duty advantage for key commodities is a big blow,” said the official.

The issue was discussed at a review meeting held by Commerce and Industry Minister Anand Sharma earlier this week, the official added.

The Ministry is looking at the option of providing cash incentives to the affected sectors under the existing Market Linked Focus Product Scheme.

Under this scheme, cash benefits are given to exporters of specific products to specific markets, generally ranging between 2 per cent and 5 per cent.

Biggest export market

The EU accounts for 16 per cent of the country’s total exports. In April-November 2013, India exported goods worth $33.27 billion to the 27-member bloc, posting 3.5 per cent year-on-year growth.

India, together with China, is among the top beneficiaries of the EU scheme, which provides preferential market access to exports from 90 developing and least-developed countries.

A number of countries, including Argentina, Brazil, Cuba, Uruguay, Venezuela, Russia, Kazakhstan and Malaysia, have graduated out of the scheme this year.

amiti.sen@thehindu.co.in

(This article was published on January 11, 2014)
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