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Pressure is mounting on the Finance Ministry to extend the duty entitlement passbook (DEPB) scheme beyond June.
The DEPB scheme, which has lasted for over a decade, has been a popular duty neutralisation scheme among exporters and currently serves about 25 per cent of the country's merchandise exports in value terms.
The latest to join the bandwagon of those calling for continuation of its validity beyond June is the Confederation of Indian Industry (CII). The apex industry chamber has written to the Finance Minister, Mr Pranab Mukherjee, suggesting that the scheme be extended up to March 2014.
The Finance Ministry has been indicating that the DEPB scheme would not be extended beyond June 30, 2011— the terminal date announced earlier. Not continuing the DEPB scheme beyond June will be a serious blow to the growth momentum achieved in exports in the last few quarters, according to Mr Sanjay Budhia, Chairman of CII's National Committee on Exports & Imports.
“We have urged the Finance Minister to extend the validity of the DEPB scheme to March 2014 and make it co-terminus with the existing foreign trade policy”, Mr Budhia told Business Line .
He noted that there was a need for stability in the export incentive regime given the situation in the post-crisis global economy characterised by over-capacity in many countries. “DEPB has been a popular, time-tested and tried scheme. Instead of looking to withdraw, why not continue with it”, he said.
Fall in exports feared
CII apprehends that there will be a big fall in exports if the DEPB scheme were to go. Mr Budhia said that many exporters may be compelled to withdraw from their long-term commitments if the benefits of the scheme were to be withdrawn.
“Foreign buyers will lose faith in Indian exporters. The image of the country will take a beating if contracts are not adhered to”, Mr Budhia noted.
The DEPB scheme neutralises customs duty on the import content of the export product. Time and again, the Government has been looking to do away with the scheme and come up with an alternative. The DEPB scheme was last extended in December 2010 and the Government had then specified that the scheme would be valid until end June 2011.
Most export promotion councils and federations, including the Federation of Indian export organisations (FIEO), have urged the Government to extend the DEPB scheme beyond June.
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