NEW DELHI: The Narendra Modi Government will be recasting export subsidy schemes with new WTO compliant schemes which give exporters rebates and incentives in a new foreign trade policy that is likely to be unveiled sometime next month.
The Government is also working to see how to reduce import dependence on the top 50 tariff Indian export lines, which constitute 60 per cent of India’s import.
The commerce, finance, industry and other economic ministries have held a series of consultations on the schemes and “are almost ready with the new schemes that are now being vetted by trade experts and legal teams,” said officials.
The schemes that are under attack at the WTO and proposed to be replaced include the Merchandise Export from India Scheme, the Export Promotion Capital Goods Scheme and some incentives for special economic zones.
The new scheme called Rebate of State and Central Taxes and Levies (ROSCTL) is expected to be compliant with WTO norms. “Currently we do give these rebates to garments and some textile units, now we will extend it to other export sectors. It should help also reverse slowdown in these sectors,” said officials.
“We have been working on the reframing of export promotion measures as otherwise, we were in trouble with many countries including our allies such as USA, Japan, Russia challenging our schemes at WTO,” said Prof Biswajit Dhar of JNU, who was formerly the director-general of RIS.
Officials also said they were looking at refunding not only local taxes such as the GST but also embedded taxes and charges such as the “Mandi” tax levied on farm products as well as excise and VAT paid on auto fuels, etc.
A number of countries, including the US, have opposed India’s export subsidies at the WTO as the country’s per capita income has been over USD 1000 for several years now.
The WTO mandates that a country can offer export subsidies as long its per capita income was below USD 1,000. India crossed that mark in 2010 but according to one set of rules had a cushion of eight years.
Among the new incentive schemes proposed is assistance to MSME production clusters. Clusters would be given assistance that would be about the same as that given to them as direct subsidies.
The government would also work with the States to develop product-specific clusters for 50 sectors with high manufacturing potential.
Incentives are also likely to be given to research and development done by export-oriented companies in a bid to allow them to access modern technologies as well as reduce their costs and make them more competitive, said officials.