In a slowdown, tinkering with DEPB rates should be avoided

EXIM MATTERS

At a time when the world economy is slowing down, the Director General of Foreign Trade (DGFT) has brought down the DEPB (Duty Entitlement Passbook) rates on several items. The rates on export of scooters, motor cycles and mopeds are down from 9 per cent to 6 per cent, OTS cans, aluminum conductors, commercial vehicles, alloy steel steam pipes from 7 per cent to 6 per cent, nuts, bolts, washers, screws of alloy steel from 7 per cent to 4 per cent, valve stems from 5 per cent to 4 per cent and so on. No doubt, some DEPB rates have gone up. For example, the rates for heat shrinkable straight joints are up from 6 per cent to 8 per cent. Overall, more items have suffered rate cuts in the engineering sector.

In the pharmaceutical sector also, injections, tablets, capsules and intravenous infusions will earn 4 per cent DEPB instead of 6 per cent. On most dyestuffs, the rates are down to 4 per cent from 5 per cent or higher. Most basic chemicals and intermediates have also suffered a cut of 1 per cent or 2 per cent.

Some plastics have taken a hit. The rates for acrylic sheets are down from 10 per cent to 7 per cent, articles made of nylon, polycarbonates and phenol-therm from 10 per cent to 8 per cent, 5 per cent and 7 per cent respectively, vacuum flasks from 6 per cent to 5 per cent, spectacle frames from 9 per cent to 7 per cent and so on.

Most leather items are untouched but there are casualties. Gents’ sandals, ladies shoes, rubber and canvas shoes footwear with rolled soles, PU unit soles are some of the items to take a 1 per cent cut in DEPB rates. Sports goods and handcrafts have suffered a 1 per cent to 2 per cent cut. Fish and food products have been spared. Most electronics items have been hit badly with cuts ranging from 1 per cent to 3 per cent but audio and video cassettes will earn 2 per cent more DEPB, up from 6 per cent to 8 per cent.

The DEPB rates for most textile items have been left unchanged but worsted woollen yarn has been given a handsome 3.4 per cent increase – up from 8 per cent to 11.4 per cent, some polyester/viscose yarn/blends/fabrics have got hit. Most miscellaneous products have to make do with 1 per cent to 2 per cent cut in the DEPB rates.

As a rule, tinkering with the DEPB rates should be avoided in uncertain times. But in the last few months, the rupee has weakened significantly. Commodity prices have fallen. Duty credit is available against export of some products under the Focus Product scheme. These factors seem to have influenced the decision to cut the DEPB rates on most items. The slowdown in exports does not seem to have had a bearing on the decision.

Under the ‘Hi-tech products’ scheme, the DGFT has included items such as SIM cards, memory cards, cellular phones, video phones, automatic bank note dispensers, hybrid integrated circuits, solar/photovoltaic cells, still image video cameras, ultrasonic scanning apparatus etc. Export of these items will earn a duty credit of 1.25 per cent of the FOB value of exports or 5 per cent of the incremental growth in FOB value of exports but there is a ceiling of Rs 15 crore for an exporter.

The commerce minister had promised to include information Technology Hardware under the scheme but that is yet to happen. Common Service Providers, so designated by the commerce ministry or State Industrial Infrastructure Corporation in Towns of Export Excellence, are now covered under Export Promotion Capital Goods (EPCG) scheme. The users of the service will have to furnish customs bond and fulfil export obligation.

tncr@sify.com