The finance ministry had strongly opposed the hike announced by the Commerce Ministry. The hike in the Duty Entitlement Passbook (DEPB) Scheme rates, announced by the commerce ministry in July, is being reviewed after stiff opposition by the finance ministry. The review is to be completed in three weeks, a senior government official has said.

Although in the initial stages, the review may result in the new rates (which have not been implemented yet) being trimmed closer to the earlier levels.

The scheme is used by 30 percent of India’s exporters to neutralise the taxes paid on inputs for making export goods.

Sources said the finance ministry was not happy with the increase and sought to know the method followed by the commerce ministry to arrive at the new rates.

The commerce ministry had hiked the rate by 3 percentage points for nine sectors, including textiles and leather, and by 2 percent for others. This was to cushion the exporters, who have been hit by the appreciating rupee.

The increased rates were announced hours after the finance ministry increased the rates for duty drawback scheme by up to 3 percentage points and decreased the interest rate on export credit by 2 percentage points. The duty drawback rates were increased after a prolonged study by a committee chaired by Saumitra Chaudhuri, a member of the Prime Minister’s Economic Advisory Council.

“The commerce ministry officials gave a presentation to their finance ministry counterparts on the method used to reach at the revised DEPB rates,” said a source. Trade analysts say the revenue implication of the hiked DEPB rates is between Rs 700 crore and Rs 800 crore.

Sources said the members of the duty drawback committee who were present during the presentation were also not convinced by the calculations by the commerce ministry.

Mr. Divya Aggarwal

Money Management Consultants Ltd

Senior Copy Editor, Money Management Consultants Ltd
New Delhi, India

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