With WTO Appellate Body in limbo, Govt gets time to replace schemes challenged by the US
The government is looking at the possibility of extending the popular Merchandise Export from India Scheme (MEIS) and other export incentives, challenged by the US at the World Trade Organization, beyond March 31 as it is worried that replacing the existing schemes could hurt the already floundering exports.
The Foreign Trade Policy 2020-25 to be announced in the new fiscal may continue many of the old schemes with some adjustment in rates, a government official told BusinessLine.
“Exporters across sectors are seeking a continuation of incentives such as the MEIS, the Export Promotion Capital Goods (EPCG), the Export Oriented Units (EOUs) and the Electronic Hardware Technology Park (EHTP) schemes, which the government was planning to end this fiscal.
With exports showing a decline so far this year, there is a growing feeling amongst policy makers that the boat should not be rocked further,” a government official told BusinessLine. India’s exports declined almost 2 per cent to $239.29 billion in April-December 2019 with most labour-intensive sectors contracting.
Last year, the US had complained to the WTO that India’s export subsidy schemes flouted rules as the country’s Gross National Income (GNI) had exceeded the per capita $1,000 annual threshold above which members were banned from subsidising exports.
Following this, a dispute panel ruled in the US’ favour. The report circulated on October 31 stated that New Delhi should do away with schemes including the MEIS, the EoU/EHTP and the EPCG within 120 days of adoption of the ruling, while the benefits of the Special Economic Zone scheme have to be withdrawn in 180 days.
Appeal against panel decision
India, however, need not be in a hurry to discontinue the schemes as it subsequently appealed against the panel decision at the WTO Appellate Body. Since the apex decision making body has not been functional since December — after the US blocked the appointment of new judges, demanding changes to WTO rules — India is not under pressure to implement the judgment of the panel.
“The fact that India has appealed against the WTO panel ruling allows the country to continue the schemes for many more months as the Appellate Body crisis is unlikely to be resolved soon because of Washington’s inflexible attitude,” the official said.
An indication that the government is slightly relaxed about replacing the export promotion schemes is evident from the fact that Finance Minister Nirmala Sitharaman’s decision to switch the MEIS with a new Remission of Duties or Taxes on Export Product (RoDTEP) scheme from January 1, 2020 has not yet been implemented.
The RoDTEP scheme is supposed to be compliant with WTO norms as it seeks to neutralise all taxes and levies imposed on export products without linking them directly to exports. But exporters are not too keen, as many in sectors such as electronics fear that the payments under it would be lower.
Published On : 27-01-2020
Source : The Hindu Businessline
