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India will continue to provide export subsidies wherever they are required and legitimate and there are no plans to phase them out, says Commerce Secretary Rajeev Kher.
However, efforts would be made to ensure that over the next five years an environment is created that would enable exporters to be competitive without subsidies, Kher said in an interview with BusinessLine .
“This is my personal view, but hopefully in the next five years, much would happen in the areas of ease of doing business, trade facilitation and infrastructure, and most sectors would not need the crutches of subsidies. If at all, only some newly evolved sectors would need sops,” he said.
Kher pointed out that at present India did not have any compulsions under World Trade Organisation (WTO) rules to do away with export sops, but things may change soon.
WTO threshold “We are only trying to bring it to the notice of the industry that subsidies on some products, where exports exceed 3.25 per cent of world trade, will come under the scanner of the WTO. We have to be prepared for that. But we are certainly not phasing out legitimate export sops,” Kher said.
Textiles is one sector where exports have already crossed the threshold of 3.25 per cent of world trade. But the new Foreign Trade Policy has provided sops to exporters from the sector as the country has time at least till 2018 to withdraw the incentives.
India also stands to lose the privilege of extending export sops once its per capita income exceeds $1,000 a year.
Responding to industry complaints that the new export schemes for goods and services announced in the foreign trade policy had lowered incentive rates for several sectors, Kher said that the Government was operating under resource constraints.
“While deciding which sector should get how much subsidy for exporting to specific markets, we have followed such precise principles that the industry will not be able to find faults,” Kher said.
On certain categories of Special Economic Zones (SEZs) such as gems & jewellery not being extended the benefit of export sops, he said that only those sectors were excluded that were not getting the benefit in the domestic tariff area as well.
He added that the Commerce & Industry Ministry would continue to push for withdrawal of the Minimum Alternate Taxes (MAT) and the Dividend Distribution Tax (DDT) on SEZs, although the Finance Ministry had not come on board yet.
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