India offers subsidies through export schemes: WTO panel

NEW DELHI: A panel of the World Trade Organization (WTO) ruled Thursday against at least five of India's export promotion schemes, saying it was granting bans subsidies in a victory for the United States, which had approached the multilateral agency.

The government has been given 90-180 days to withdraw concessions under the schemes, which include the Indian Merchandise Export (MEIS) scheme, Scheme of Special Economic Zones , Export-oriented unit schemes, electronic hardware technology park and biotechnology park (EOU/EHTP/BTP), export promotion capital goods (EPCG) and the tax-free import scheme for exporters (DFIS).

“...the panel found that India was granting prohibited export subsidies in the form of exemptions from customs duties and the national Integrated Goods and services tax , deductions from taxable income and the issuance of promissory notes (or scrips) that companies can use to pay certain debts with the government. The panel rejected other claims by the United States about a subset of customs duty exemptions and a special tax exemption, a source said.

While the Indian authorities did not comment, in a statement, the US Trade Representative said the WTO panel had agreed that India provides prohibited subsidies to Indian exporters worth more than $7 billion annually.

The agency said that India offered prohibited subsidies to producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel, to the detriment of American workers and manufacturers.

This is a resounding victory for the United States, said USTR Robert Lighthizer. While the government has already announced a replacement for MEIS, it has the option to appeal against the panel's ruling.

The United States had dragged India to the WTO in March 2018, questioning its export promotion plans as the trade battle between the two countries intensified.

During the hearing, the panel first rejected India’s claim that it was exempted from the prohibition on export subsidies under the special and differential treatment provisions of the WTO’s Agreement on Subsidies and Countervailing Measures. The panel determined that India had “graduated” from the exemption it was originally entitled to and was not eligible for any further transition period.