Business

Exporters To Get Indirect Central Subsidies Instead Of Direct Ones

The central government plans to replace direct subsidy schemes for textile and clothing exporters with indirect benefits before the World Trade Organisation (WTO) deadline for abolishing such sops.

A government official has stated that the commerce and textile ministries are already examining alternative schemes allowed by the WTO like the ones meant for quality upgradation and subsidising capital expenditure.

These new schemes which would be of equal value, will replace the ones which will be phased out, he stated, adding that although direct export sops will be phased out, the government has no intention of reducing the total support extended to the Indian textile sector.

Also, these changes would happen gradually and there would not be any immediate withdrawal of popular schemes like Interest Subvention Scheme or Merchandise Export from India Scheme, he stated.

Incidentally, the USA has been pressing India to overhaul its textile export policy since it plans to do away with all forms of export subsidies for the textile sector by 2015.

The USA has argued that the WTO secretariat released calculations showing that India had reached “export competitiveness” in textiles and clothing no later than 2007. Since WTO rules gave member nations eight years from that date to phase out export subsidies, the transition period ended in 2015.

However, Indian trade negotiators have counterargued that since the WTO undertook a computation of India’s world trade share after a member’s request only in 2011, and determined that it had retained competitiveness on the basis of 2009-10 data, it can be inferred that the phase-out period would end in 2018.

India’s annual exports of textiles and garments have been pegged at over US $35 billion accounting for about 5 per cent of world trade share.

Although India has admitted that export sops for the textile sector should be done away by 2018, the official stated that the government does not want exporters to panic, especially since they are already reeling under the burden of GST. Therefore the process of phasing out existing schemes will begin gradually by next year, the official stated, though it has been conveyed to textile exporters that direct export incentives would ultimately have to go.