Commerce Ministry looking for alternatives to export subsidies

Posted by Daily Shipping Times on 10-04-2018        Tweet

NEW DELHI: With the US questioning India’s export subsidies at the World Trade Organisation (WTO), New Delhi has got cracking on identifying alternative ways to support exporters without facing challenges at the multilateral forum.

“An informal committee has been set up under the Director General of Foreign Trade (DGFT) to look into the existing export promotion schemes. The idea is to identify the non-compatible provisions and to look for alternatives assuming that India's eight-year phase-out period argument is not accepted,” a Government Official said recently.

Industry bodies invited

In a recent meeting, the informal committee invited views from industry bodies FICCI and CII, exporters’ body FIEO and the Commerce Ministry’s think-tank, Indian Institute of Foreign Trade (IIFT), on the matter.

“Issues, including problems with the existing export subsidy schemes vis-à-vis the WTO rules, and how other countries were supporting their exporters were discussed,” the official said.

The informal committee is likely to be given a formal shape soon through an official notification, and more industry bodies and export bodies could be part of it.

Options being explored

The committee, headed by the DGFT, will look at ways in which a production-based subsidy can be used to replace export subsidies, as these are allowed under the WTO. “We could look at the cluster-based approach, where export-centric clusters could be selected and subsidies given to units based on what they produce rather than what they export,” the official said.

US complaint

The US dragged India to the WTO’s dispute settlement body last month complaining that India’s export subsidies were harming American companies.

It identified five popular export promotion schemes, including the merchandise export from India scheme (MEIS) and the export promotion capital goods scheme, as violating the WTO’s Agreement on Subsidies and Countervailing Measures.

The US complaint is based on the fact that since India’s per capita Gross National Income (GNI) exceeded the threshold of $1,000 for three years in a row in 2015, as per WTO rules, it is no longer eligible to extend export subsidies.

The committee headed by the DGFT will look at ways in which a production-based subsidy could be used to replace export subsidies, as these are allowed under the WTO.