Textile ministry to replace export incentives with WTO-compatible schemes

Textile ministry to replace export incentives with WTO-compatible schemes
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Mumbai, Dec 4: Faced with sharp criticism over incentives offered to boost exports, the Textile Ministry is working on an alternate strategy that would be compatible with the World Trade Organisation (WTO) guidelines to appease overseas importers without violating global trade norms.
At present, the government is offering 2-4 per cent of incentives under the Merchandise Export Incentive Scheme (MEIS) to exporters, in addition to production incentives such as interest subvention and technology upgradation fund scheme (TUFS).
These incentives, however, were challenged by the United States at the WTO. Informed sources said that India, which has attained a $3-trillion economy, does not require external incentives to compete in the global market like countries such as Bangladesh, Vietnam and Pakistan, which have smaller economies. According to industry sources, the WTO has set up a committee to examine the issue and submit a final report, perhaps in a couple of months from now.
“The government is in the process of putting in place alternate schemes to promote exports, which will improve the competitiveness of Indian products. These alternate schemes are expected to be WTO-compatible. The alternate schemes will replace earlier schemes such as MEIS, export promotion capital goods (EPCG), 100 per cent export oriented units (EOUs), special economic zones (SEZ), etc. We have been given to understand that the level of support will not in any way be lowered in the alternate scheme,” said Ujwal Lahoti, chairman, Lahoti Overseas Ltd.
The existing export promotion schemes have been extremely useful in increasing exports, especially on account of the various disabilities, including preferential tariffs given to competing countries and high logistic and transaction costs incurred on account of infrastructural deficiencies, etc, suffered by exporters.
In order to offer suggestions on WTO-compatible alternate schemes, the Cotton Textile Export Promotion Council, under the aegis of the Ministry of Commerce, has engaged the services of a consulting firm, Ikdhvaj Advisers LLP, to undertake a ‘Study on Alternate Export Promotion Schemes’, which can be recommended to the government.
A committee has been formed with experts such as Veena Jha, a renowned economist, Harsha Vardhana Singh, former WTO deputy director general, and Jayant Dasgupta, former ambassador to the WTO.