Textiles DEPB in a fix

Finance, textiles ministries lock horns over the fate of depb

The continuation of the duty neutralisation benefit "" duty entitlement passbook scheme (DEPB) on textiles continues to hang fire with a final decision now expected to be taken by Prime Minister Manmohan Singh before he leaves for the United States.

The finance ministry wants the DEPB on textiles to be reduced, but the textiles ministry has said that the present benefit should continue .

There however seems to be a broad agreement on the issue of reducing the DEPB benefit to the steel sector. The new DEPB rates for steel are expected to be announced after value caps are imposed on around 36 steel products.

Commerce and Industry Minister Kamal Nath today indicated that the DEPB on textiles and steel could be reduced in line with the cut in customs duties for these sectors.

"Since the customs duty has gone down, the DEPB rates also have to go down. They are being worked out and will be announced in a day or two", Commerce and Industry Minister Kamal Nath told reporters on the sidelines of a function.

Nath said that since the import tariffs in the textile sector were brought down to zero in the budget, adjustment will have to be made in the DEPB rates.

Exporters will get the DEPB benefit minus the tariff concessions granted in the union budget, he said adding that discussions were on with the finance minister on the steel export subsidy.

Technical calculations are being done under a scientific formula of seven-year standing, he said adding "all we need to do is put the figures into the formula."

The minister said that in the long run, the DEPB scheme will have to be replaced with a new scheme which is WTO compatible.

"We already have something in mind. It will be worked out by December and then take another couple of months. It has to be a user-friendly scheme governed by the principle that taxes and cesses do not have to be exported," he said.

The DEPB is a reimbursement of basic and special customs duty 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.

According to data compiled by the revenue department, the government had to forego as much as Rs 11,500 crore in 2003-04 on account of DEPB benefit.