Textile ministry to replace export incentives with WTO-compatible schemes

Appoints a group of experts in WTO matters; report to be submitted by next week

The Union textile ministry is working on a way to harmonise its export incentives with the World Trade Organization (WTO) guidelines.

Currently, the government offers incentives of two to four per cent under the Merchandise Exports from India Scheme (MEIS). In addition to production incentives such as interest subvention and the Technology Upgradation Fund Scheme.

These incentives have been challenged at the WTO by the American government. One contention of critics is that India’s $3 trillion economy is quite unlike those of smaller countries in this region, such as Bangladesh, Vietnam or Pakistan, that require external incentives to compete in global markets. A WTO committee is reportedly examining the issue.

“The government is in the process of putting in place alternative schemes to promote export, which will improve the competitiveness of Indian products. These will replace schemes such as MEIS, the Export Promotion Capital Goods scheme, 100 per cent export oriented units, Special Economic Zones, etc. We have been given to understand that the level of support will not in any way be lowered in the alternative scheme,” said Ujwal Lahoti, chairman, Lahoti Overseas.

The Cotton Textile Export Promotion Council (Texprocil) under the ministry of commerce has engaged a consultancy firm, Ikdhvaj Advisers, to study alternative schemes which could be recommended. A committee has been formed for this. It has economist Veena Jha, Harsha Vardhana Singh (a former deputy director general at WTO and Jayant Dasgupta, a former ambassador to WTO. Their study will cover the entire value chain in the sector.

“The alternative scheme is set to address three broad areas. First, it should be linked with employment generation. Second, it should formalise the economy. Third, it should be a more acceptable concept than free-on-board value.

The committee is set to give its report by next week,” said Siddhartha Rajagopal, executive director at Texprocil. The idea is to devise schemes that cannot be challenged due to multiple interpretations by countries on the possible benefits to exporters.

World trade in textile and clothing grew in 2017 by nearly four per cent over the previous year, to $756 billion. The growth in 2018 is expected to be similar. India registered 5.4 per cent growth in the sector last year, to $37.4 billion. Its share in world trade in textile and clothing this year is estimated at around five per cent. Our export is a seventh of China’s.