DEPB scheme to stay

RUN-UP TO THE FOREIGN TRADE POLICY

In a significant concession to exporters, the government has decided to retain the Duty Entitlement Passbook (DEPB) scheme, a popular duty neutralisation instrument, till a new scheme is formulated. There were plans to discontinue the scheme from March 2005.

The commerce department has also managed to ensure the continuation of DEPB benefits for the textiles sector, despite the revenue department having sought its withdrawal in the wake of a new tax regime.

"The textiles ministry supported the commerce department's stand that the DEPB scheme must continue for textile exporters as the sector will be open to fierce competition after the quota regime comes to an end from January 2005," an official said. There are 82 textile products on the DEPB list.

Commerce and Industry Minister Kamal Nath has managed to prevail upon Finance Minister P Chidambaram to continue the DEPB scheme beyond March 2005.

The finance ministry had sought its replacement with the duty drawback scheme as World Trade Organisation (WTO) members considered the DEPB scheme to be non-compatible with the provisions of the General Agreement of Trade and Tariffs.

The DEPB scheme allows the reimbursement of basic and special Customs duties paid by an exporter on an imported input used in the export product.

The benefit is given by way of a grant of duty credit against the export product at specified rates. Already, there are over 15 countervailing cases relating to DEPB initiated against India by other countries.

In keeping with the emphasis on the agricultural sector, the Foreign Trade Policy will also contain a new scheme for fruits, flowers, vegetables, minor forest produce and their value-added products.

Under the scheme, exporters of these products will be allowed to import duty-free inputs equal to 5 per cent of their annual exports. Exporters will be given a duty-free entitlement certificate, which will be saleable and transferable.

The new scheme will be part of the incentive package finalised for the agriculture sector, and includes earmarking funds under the Assistance to States for Development of Export Infrastructure (ASIDE) scheme for agri-export zones.