K.R. Srivats

New Delhi, March 18

THE Union Government has done away with cess on exports of coffee. Currently, there is a cess of Rs 500 on every tonne of coffee exported.

India exports more than 70 per cent of its average output of 2.8 lakh tonnes. Coffee exports during calendar year 2004 stood at about 2.1 lakh tonnes, valued at about Rs 1,000 crore.

This move of the Government would come as a relief for number of exporters, whose margins were impacted on account of lower price realisations and appreciating rupee against dollar.

Informed sources pointed out that the Commerce Ministry had been in favour of scrapping the coffee export cess. The Department of Commerce had in-principle agreed that taxes and duties should not be exported as they would impact competitiveness of Indian products abroad.

Academics and trade experts, including certain policy makers, have contended that imposition of export taxes to improve terms of trade of the exporting country may be a risky policy for many developing countries.

The World Trade Organisation (WTO) does not prohibit export taxes.

But, there is also growing recognition that export taxes could distort trade and result in overall efficiency losses, reduced welfare and lower growth in the long term, especially for countries without market power.

India, which is not a major user of export taxes, maintains export tax on hides, skins, leathers, tanned and untanned (not including manufacture of leather) to ensure export of high value added leather goods, and nominal cesses on number of commodities, especially farm items.

(This article was published in the Business Line print edition dated March 19, 2005)
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