India To Seek More Time For Phasing Out Import Curbs

India is likely to seek a long time duration of 7-10 years for freeing imports of certain sensitive products, mainly agricultural goods, at the forthcoming balance of payments consultations coming up in early June under the aegis of the World Trade Organisation (WTO) in Geneva.

Further, special incentives like special import licenses (SIL), currently offered to category-holders, will also have to be gradually eliminated, point out trade experts. The phase out will also imply a review of the presently followed memorandum of understanding system for car manufacturers.

India is due to submit its phase-out schedule within this month, sources said. The commerce ministry proposal envisages removal of restrictions in two main phases over 5 years. In the first phase, items allowed for import under the special import license list can be made freely importable and an equal number of restricted items can be moved onto the SIL list. Dual use items can also be made freely importable. In the second phase, the items that remain on the SIL list can be made freely importable.

 

After the last ExIm policy, the restricted list comprises of around 2,500-2,800 items, some of which are on the SIL list. While 59 items are prohibited, roughly 650 items are on the special import license list and 178 are canalised items. On the basis of the harmonised code, it has been calculated that around 70-72 per cent of the items are either freely importable or can be imported under SIL. Almost 7000 items are on the free list.

In the case of the automobile sector, the official thinking has been that in the first phase, fully built-up cars should be allowed freely at the current peak duty rate of 40 per cent in addition to a 40 per cent countervailing duty. Similarly, the imports of components in completely knocked down (CKD)/semi-knocked down (SKD) condition may be allowed freely at the same rate of duty as applicable to passenger cars.

In the second phase, both fully built-up cars and components in CKD/SKD condition may be allowed freely at the reduced level of applicable duty plus CVD. This approach will provide incentives for indigenisation, discourage setting up of sub-optimal capacity and induce necessary competition to the foreign players who have set up capacities for automobiles in India, sources said.

India's major trading partners have been demanding that India phase out all restrictions within 2 years. India, however, will not be in a position to do so and will seek 5 years for general items and 7-10 years for sensitive items.