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Ministerial spat holds up Rs 4k cr Target Plus sops
March, 27th 2007

The fate of exporters waiting to avail of benefits worth Rs 4,000 crore from the controversial Target Plus scheme hangs in balance due to differences between the finance ministry and the commerce department. Efforts by a committee of secretaries (CoS) to resolve the issue has not borne fruit so far due to lack of clarity on the kind of duty-free imports to be allowed under the scheme.

While the scheme originally devised by the commerce department said the goods allowed to be imported should have a broad nexus or connection with the product exported, the finance ministry wants the nexus should be close. In other words, the duty-free imports should be restricted to inputs used in manufacturing the items exported under the scheme.

Litigation has also added grist to the controversy with the revenue department (under the finance ministry) and the directorate general of foreign trade (under the commerce department) expressing diverse stands. The PMO is taking stock of the situation so the governments stand could be rid of confusion.

While the scheme has been withdrawn due to objections from the finance ministry, exporters are yet to enjoy the fruits of the exports made under Target Plus estimated to be in the range of Rs 4,000 crore. The scheme was devised to provide higher incentives for firms achieving high growth in exports. The official sources said that the funds can only be disbursed after the CoS headed by the Cabinet Secretary takes a decision on the scope of the scheme.

We do not yet know whether all the exporters staking a claim under the scheme will remain eligible after the CoS comes up with its verdict. If the CoS decides that the nexus should be minute and not broad, then a lot of claims will fall through.

As of now, the revenue departments argument in favour of close or minute nexus seems to have more acceptance within the government. However, it is not clear if this stand would stand legal scrutiny.

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