T N C Rajagopalan: Alternative to DEPB scheme

EXIM MATTERS

The first major hint for an alternative to the Duty Entitlement Passbook (DEPB) scheme has come from the joint secretary (JS-DBK), Central Board of Excise and Customs (CBEC).

In separate letters to the chief commissioners of excise and Customs and the Export Promotion Councils (EPC), the JS-DBK has said an exercise is under way in the finance ministry to expand the scope and coverage of the drawback scheme by way of including more items in the existing schedule as also by providing duty neutralisation on all inputs that go into the manufacture of an export product.

He has called for information regarding production, imports and prices of about 2,640 chemical items that go into the manufacture of various export products.

It is expected that more such lists for inputs, other than chemicals, will follow. The list covers all the chemicals that appear as inputs in the standard input output norms notified by the DGFT.

All-industry rates (AIR) of duty drawback are worked out taking into account parameters such as prices of inputs, the incidence of duty, input-output ratio and share of imports in total consumption.

AIR are based on the concept of averages, wherein the drawback rate itself as well as its Customs and excise portions are based on weighted averages of consumption of imported or indigenous inputs of a representative cross section of exporters and the average incidence for duties suffered on such inputs.

Usually, the JS-DBK calls for the data of consumption from exporters through the EPCs and notifies the AIR. Last year, AIR were notified for about 800 items.

Once the rates are notified, the exporter has to make a claim for drawback in the shipping bill and the Customs authorities credit the exporter's account with a designated bank at the port of shipment, after allowing the shipment.

The Kelkar committee had suggested that the DEPB scheme should be abolished and AIR must be notified for all the items for which standard input output norms have been notified and also that the drawback amount must be credited to the exporter's bank account at any place instead of at the designated bank at each port. The finance ministry seems to have taken the suggestion seriously this year.

The foreign trade policy says the DEPB scheme will continue till an alternative is found after consultation with the exporters. The DGFT had called for suggestions for alternatives to the DEPB scheme and has held many meetings with exporters to hear the suggestions.

The commerce ministry has appointed five consultants to study similar schemes abroad and suggest alternatives. These steps seem cosmetic in the wake of the recent letter of the JS-DBK.

The letter from the JS-DBK talks about duty neutralisation on all inputs that go into the manufacture of an export product. It is noteworthy because "duty neutralisation" is an expression associated with the DEPB scheme.

The commerce ministry ignored the Kelkar panelrecommendations to serve the interests of its own staff in the licensing offices and DEPB license traders. This time, the finance ministry seems intent on taking control.

tncr@sify.com