New trade policy set to overhaul export subsidies

The Central government, in a new foreign trade policy it is likely to unveil sometime next month, will recast export subsidy schemes with new WTO-compliant schemes that will give rebates and incentives to exporters. It is also working to see how to reduce import dependence on the top-50 goods that India exports.


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 World Trade Organisation (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 give these rebates to garments and some textile units. Now, we will extend it to other export sectors. It should also help reverse the slowdown in these sectors, said officials.


We have been working on reframing export promotion measures as otherwise, we were in trouble with many countries including our allies like USA, Japan and 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 and excise and VAT paid on auto fuels.

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 $1,000 for several years now.


The WTO mandates that a country can offer export subsidies as long it is per capita income was below $1,000.