Monday, June 20, 2011

Government mulling rollback of countervailing duty on coal imports

The Finance Ministry is mulling over a rollback of the countervailing duty (CVD) on coal imports meant for power infrastructure projects.

Government sources said that the consideration was for relaxing the five per cent CVD for imports specifically meant for thermal power generation or coal-based power plants and related infrastructure projects. Currently, there is five per cent Customs duty on non-coking coal, in addition to one per cent excise duty announced on 130 items in the last Budget.

In the 2011-12 Budget, the government had imposed CVD of five per cent on coal imports in cases where the importers avail of Cenvat credit facility. This move was initiated when a levy of one per cent excise duty was proposed by the government on 130 items without Cenvat credit. But if Cenvat credit is taken, then these goods would attract a tariff rate of five per cent, which is applicable for all categories of coal imports such as lignite, coke, tar and others.

Finance Ministry officials contend that the CVD was imposed to provide a level-playing field for domestic manufacturers and was charged at a rate equal to the excise duty rate.

Cenvat credit rate denotes the credit availed by a manufacturer of goods in the form of a deduction of input tax paid on the purchase of raw materials, fixed assets, packing material etc. from the total tax payable to the government, while CVD is also known as anti-subsidy duty.

 

Thursday, June 16, 2011

Government may impose import duty on sugar in a week

The government is likely to impose import duty on sugar in a week as cane planting gathering speed in the country

The Finance Ministry, which is seeking 15 per cent import duty, is likely to take a decision on the Food Ministry's proposal to end duty-free imports of sugar. It may be recalled that the Ministry, while extending an earlier deadline in April, had given the nod for duty-free imports till June 30.

A Food Ministry official, who foresees the Finance Ministry making an announcement regarding the increase in duty soon, believes that the government does not want the industry and farmers to be disadvantaged by imports.

Nevertheless, experts reckon that with the decline in domestic prices due to surplus output, the likelihood of imports was anyway low, even without duty.

Being the world's top sugar consumer and the biggest producer after Brazil, India's production is forecast to touch 24.5 million tonnes, against an annual consumption of about 22 million tonnes in the 2010-11 year ending in September. In the previous season, production was 19 million tonnes.

Meanwhile, the domestic sugar industry has been putting pressure on the government to convince the Food and Commerce ministries of the need to urgently open the exports quota as it has almost been used up. With sugar production in 2011-12 projected to be higher than the previous seasons at around 29.3 million tonnes, a decision on opening up exports becomes all the more essential.

As of now, sugar mills have exported close to 400,000 tonnes, of the half million tonnes permitted by the government under open general licence (OGL) for the 2010-11 sugar year, which began in October

Tuesday, June 14, 2011

Finance Minister gives DEPB 3-month extension for one last time


THE Duty Entitlement Passbook (DEPB), the popular-export incentive scheme, has got a three-month extension from the Finance Ministry. It was to end on June 30.

However, the Ministry has made it clear that exporters should brace themselves to switch to the duty drawback scheme by October as it would not grant any further extensions to DEPB.

According to a source, by permitting exporters to enjoy the benefits offered by DEPB for three more months, the government wants to ensure a smooth transition to the new scheme.

The source apprised that a three-member panel, comprising Secretaries from the Commerce and Finance ministries, would work out the modalities of migration to the duty drawback scheme.

Last week, the Finance Minister, Mr Pranab Mukherjee and Commerce Minister, Mr Anand Sharma met and discussed the issue and decided to extend the scheme.

It is a known fact that the Finance Ministry is firm on ending DEPB, contending that it allows exporters double benefit instead of just neutralising the import duty on inputs that go into exports.

In 2010-11, the scheme cost the exchequer Rs 8,520 crore, of which more than 60 per cent was exploited by large engineering and chemical exporters.

In contrast, the drawback scheme just neutralises levies paid on inputs. The rates are fixed annually, based on the changes in the duty structure in the Budget.

In this direction, an expert panel headed by Planning Commission member Mr Saumitra Choudhury will evaluate the duty drawback rates for all export products, including those covered under DEPB now.

Besides, the Finance Ministry has also asked the Commerce Ministry to direct export promotion councils to provide relevant data to the panel. The industry is not against the DEPB phase-out, as long as a substitute scheme is in place.

Thursday, June 9, 2011

Fieo asks Mr. Anand Sharma for interest subvention, DEPB extension

DRAWING attention to the concerns over constant increase in export credit rate over the last one year, Mr Ramu S. Deora, President, Federation of Indian Export Organisations (Fieo), pointed out recently that exporters were competing with countries having credit rates below 5 per cent.

Speaking at an Interactive Session in Chennai recently, Mr Deora said that the base rate of Indian banks had moved up between 2-2.50 per cent in the last 7 to 8 months, pushing up export credit, but on the contrary, interest subvention for exports had been withdrawn from April 1, 2011.

According to the Fieo Chief, export finance cost, which was 7 per cent in July 2010, had now moved up to somewhere between 11-11.5 per cent, which is a whopping increase of about 57-64 per cent. Hence, Mr Deora urged the Commerce and Industry Minister, Mr Anand Sharma to prevail upon the government to draw the line between exports and domestic finance and make available export credit to the MSME sector at 7 per cent, and to others at 9 per cent in order to maintain export momentum.

On the DEPB scheme, Mr Deora acknowledged that it had been a time-proven instrument, helping Indian exports grow to the present level. "DEPB is well suited to the needs of small exporters, since it is not feasible for them to effect imports on their own account as economic volumes are not generated," Mr Deora said.

The Fieo chief observed that the uncertainty over continuation of the DEPB Scheme after June 30, 2011 had been a cause of concern to exporters, which could taper down growth. Hence, he urged Mr Sharma to extend the DEPB scheme till GST becomes operational or at least till the fiscal-end.

While suggesting a host of measures to cut transaction cost of exports, ranging between 7- 10 per cent of exports value, Mr Deora also alluded to the occurrences of long delay while ratifying the Norms for Advance Authorisation, issued under Paragraph 4.7 on self-declaration basis where SION does not exist.

Raising concern on the delays and paperwork involved in closure of advance authorisation at DGFT, the Fieo president contends that the same procedure should be put in force at the Customs also.

Mr Deora also asked the government to implement full EDI connectivity amongst the agencies involved in import/exports for seamless movement of cargo, which could go a long way in reducing transaction time and cost to a large extent.

Meanwhile, on the issue of DEPB extension and re-introduction of interest subvention, the Commerce Minister, Mr Sharma has made it clear that both issues have been taken up with the Finance Minister, who had given an assurance of adequately addressing the exporters' concerns.

Mr Sharma also announced that from now on the DGFT's zonal office would provide time-bound clearances, which would be audited every quarter. Besides, he also apprised that he was trying to make available the discharge of export obligations electronically in order to do away with the voluminous documents and delays.

The minister also assured that he would review the delays in imposition of provisional anti-dumping duty so that the same could be imposed in reasonable time, compared with the best practices. For providing commercial information to exporters, Mr Sharma agreed to strengthen commercial missions abroad and open more such missions.

With regard to the new manufacturing policy, Mr Sharma said it would be announced shortly with the aim of augmenting the share of manufacturing in GDP from 16 per cent to 25 per cent.

Wednesday, June 8, 2011

Tea imports plunge 25 pc to 19.26 m kg in FY11

Tea Board data indicates that imports in the last fiscal plunged by more than 25 per cent to settle at 19.26 million kg.

According to the data, the country had imported 25.84 million kg of tea in the year-ago period.

Considering that India, the world's largest consumer of tea, imports the brew only to re-export to other countries, the decline in imports is a pointer to fall in re-exports.

Data shows that imports from Argentina, Canada, Kenya, Nepal, the UK and the US climbed, while inbound shipments from China, Indonesia, Iran, Malawi and Sri Lanka dipped.

A major fall was witnessed in tea imports from Vietnam. While in 2009-10, the country imported 7.21 million kg of tea from South-East Asian countries, in the last fiscal the figure slid to 0.72 million kg.

Similarly, exports from Indonesia to India dropped to 1.44 million kg in 2010-11 from 2.23 million kg in the earlier period.

Sri Lanka shipped less quantity to India in 2010-11 at 0.39 million kg from 0.93 million kg despatched in the year-ago-period.

As regards major tea exporting countries to India, Nepal sent 8.65 million kg in the past fiscal, against 7.47 million kg in the year-ago period.

Likewise, in 2010-11 shipments from Kenya to India stood at 4.51 million kg compared to 2.27 million kg the earlier year.

Tuesday, June 7, 2011

Exporters pin hopes on corporate India’s appeal to FM

EXPORTERS are counting on fresh representations by leading corporate houses to retain the popular Duty Entitlement Pass Book (DEPB) scheme, despite the Finance Ministry making it clear that it is not in favour of extending the scheme beyond June 30.

Finance Ministry estimates suggest that the DEPB drains about Rs 8,000 crore every year. The scheme neutralises the impact of basic and special Customs duties on the import content of exports. With the grant of duty credit against the export product under DEPB, exporters end up saving around 8-10 per cent on the cost of their exports.

Since it overcompensates exporters, the Finance Ministry feels DEPB is not WTO-compliant. It has asked exporters to fall back on the duty drawback facility, which does the same neutralisation by compensating for domestic taxes paid.

However, exporters are not too keen on lower duty drawback rates, as they feel that it under-compensates them because several domestic taxes are not considered. Both the Finance Ministry and the Commerce Ministry are of the view that all problems will be sorted out with the launch of the goods and services tax (GST).

But as GST may take a year to be implemented, exporters have once again begun lobbying with the Finance Ministry to extend DEPB. Their efforts have got a shot in the arm after the initiative of the industrial houses, who have taken up the matter with the Finance Minister, Mr Pranab Mukherjee. It is learnt that corporate leaders have made it clear to Mr Mukherjee that discontinuing DEPB would substantially hit
exports.

Keep fingers crossed on DEPB, Khullar tells exporters

EXPORTERS have been asked by the Commerce Ministry to "keep their fingers crossed" on their demand for extension of the duty entitlement pass book (DEPB), a tax neutralisation scheme on exports, beyond June 30.

Exporters have begun pressing their case with both the Commerce and Finance Ministries for continuation of the sops after the Revenue Department made it clear that the DEPB window would close from next month-end.

The Chairman of CII's National Committee on Exports, Mr Sanjay Budhia, pointed out that exporters across different sectors were worried as no alternative scheme was being offered in place of the DEPB.

According to an official, the Commerce Secretary, Dr Rahul Khullar, advised representatives of business chambers and export promotion councils, who called on him, to "keep their fingers crossed" as it was up to the Revenue Department to take the final call on the
issue.