A key export tax refund scheme, Agriculture Infrastructure and Development Cess (AIDC), subsidy on crop loans, import duty on cotton and ban on onion exports are among a raft of India’s policy interventions that have come under a heightened glare of various World Trade Organization (WTO) members, especially the US.
Seeking “an update on the operational status and guidelines” of the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, Washington wants New Delhi to “provide an explanation of this measure, including what specific duties and taxes are eligible for refund for agricultural products such as rice”. “If operational, please list what agricultural products are eligible under this measure,” it says.
The RoDTEP scheme has, from January 1, replaced the Merchandise Exports from India Scheme (MEIS), which was successfully challenged by the US at the WTO on ground of being inconsistent with global trade norms. India has appealed against the ruling of the WTO’s dispute body and a verdict is yet to come.
The US wants India to clarify if the AIDC would apply to the specified agricultural products produced and sold domestically and how long New Delhi intends to slap it. The cess, the US says, appears to apportion the existing basic custom import duty into two separate taxes or duties and asks the “reasoning for apportioning the BCD into two different duties for select products”.
Before a meeting of the WTO’s committee on agriculture on March 29 and 30, countries had submitted questions on various farm policies adopted by India. While such meetings provide an opportunity to WTO members to seek replies from one another on various measure in the farm sector, they are at times aimed at gauging if the steps are trade-distorting and can be challenged at the multilateral body.
Presenting the Budget for FY22, finance minister Nirmala Sitharaman had proposed AIDC. However, while applying this cess though, she made sure that there would not be extra burden on consumers on most items. The new cess is levied on 29 products, including gold, imported apple, imported alcohol (excluding beer), petrol and diesel. At the same time, the custom duty has been reduced on 25 of these products and excise duty and special additional excise duty have been trimmed on unbranded and branded petrol-diesel.
As for the RoDTEP scheme, Indian officials have asserted that the it is fully WTO-compliant, as it only reimburses levies paid on inputs consumed in exports. The scheme has been implemented from January 1 but operational details and refund rates are yet to be notified.
The MEIS, which was replaced by the RoDTEP, was the largest export incentive scheme under which the government had approved Rs 39,039 crore for FY20.
Australia has sought to know the domestic market circumstances and policy considerations that led to a 10% tariff being imposed on cotton imports. “Whether India expects further tariff increases on cotton or the introduction of other measures to limit imports of cotton?” it asks.
The US has also posed queries on India’s export subsidy in the sugar sector, seeking details of how this programme is implemented. It highlighted that New Delhi had, in December 2020, approved sugar export subsidies of Rs 3,500 crore for the marketing year 2020-21 to ship out six million tonne of the sweetener.
Washington also seeks a reply as to how the interest subvention scheme is implemented in short-term crop loans. “What commodities benefit from each scheme included in the notified measure ‘interest subsidy’?” it asks.
Japan wants India to explain as to how New Delhi has given due consideration to the effects of an onion export ban on importing countries’ food security.