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With no substitute in sight, govt may keep DEPB alive
December, 21st 2006

Heres some cheer for exporters. Budget 2007 is likely to announce extension of the most popular export-promotion window the duty entitlement pass book (DEPB) scheme by another year. As of now, the DEPB scheme is scheduled to lapse on March 31, 2007.

Commerce ministry officials said that since a replacement for the DEPB scheme was not yet in place, there was no logic in waiting till the scheme lapsed and then announcing an extension. It is not reasonable to keep exporters on tenterhooks till the last minute. They have to make plans for the future based on a number of issues including reimbursement schemes, an official said.

The commerce ministry has taken up the issue with the finance ministry and is optimistic about a positive response. Officials said that since the government had failed to come out with a new scheme, there was no alternative other than extending the present scheme.

The DEPB scheme seeks to neutralise the incidence of customs duty on the import content of the export product by granting a duty credit against the export product. It is seen as non-compliant with World Trade Organisation (WTO) norms. The non-compliance is mainly because of its non-transparent nature as the reimbursement is based on pre-fixed rates and is freely transferable.

The government has been trying to replace the scheme for more than two years. Earlier, a committee set up by the Centre had come up with a scheme to reimburse both Central and state levies like Octroi. However, there was a lot of confusion on how the Centre would go about reimbursing state taxes and the scheme was finally shot down by the legal ministry.

Taking cognisance of the problems faced by exporters due to a piece-meal extension of the scheme (by three months at one time), the Centre decided to extend the scheme for a year in 2006-07. A taskforce under the chairmanship of Planning Commission member Anwarul Hoda was set up to work on an alternative scheme which would not just be WTO-compliant but also take care of local levies.

Other members in the committee include Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce & Industry (Ficci); and Suman Bery, chief of National Council for Applied Economic Research (NCAER). The report of the committee is awaited.

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