Canada Debacle Casts Pall Over India Export Schemes

In a development which could set a damaging precedent for disputes over Indian export incentive schemes, the government has lost an anti-subsidy case to Canada. Although the case itself deals only with granite exports to Canada by various Indian exporters, it could have wider repercussions as the Canadian government has defined all of Indias current export incentive schemes as subsidies.

As a result, the schemes, including the pre-shipment export credit scheme, post-shipment export credit scheme, exemption of export profits under section 80 HHC and sections 10A and B of the Income-Tax Act (under which profit exemptions are given to export-oriented units and export processing zone units), preferential long term financing, and duty exemptions on imported consumables, tools and machinery for EOUs, can now attract a duty equivalent to the subsidy extended and injury caused, diplomatic sources told Business Standard. In other words, all the schemes have been declared countervailable.

 

The immediate impact could be felt on two anti-subsidy cases filed by the European Union against India, on antibiotics and stainless steel bars. The EU had initiated the antibiotics case in September 1997 and the stainless steel bars case in October 1997.

A commerce ministry team is now in Brussels to fight Indias case on subsidies to antibiotics exported by Ranbaxy and Kopran. An EC team is also due to visit India on February 25-26 to discuss the stainless steel bars case.

Confirming the news, additional commerce secretary Nripendra Mishra said, The granite case is company-specific and product-specific. We are still trying to find out the legal position. No official hearing was granted to the Indian government and we are examining whether we can appeal. However, he played down the possibility of the Canadian case affecting Indias prospects in its cases against the EU, saying, The two are very different.

The granite case dates back to 1994, when Canadian authorities began anti-dumping and anti-subsidy investigations against Indian black granite and levied a duty on its import. The case came up for review suo moto last October. After the review, the duty has been hiked to 48 per cent, effective mid-January.

The Canadian authorities had argued that Indias export incentive schemes were subsidies and violated the ethos of the new world trade order. Diplomatic sources said Indias case was not appropriately defended.

The commerce ministry has been planning to set up a committee to examine whether its export schemes are consistent with WTO norms. It is not yet clear whether this has been done. However, the ministry has started considering alternatives to section 80 HHC to compensate exporters.