[T.S.R:17287] DEPB possible?

Do you think the proposal of rolling back DEPB is posible ?
 
just some data points to help you to formulate an opinion on it

	Production		Exports			Domestic Sales
Manufacturers	April-March		April-March		Exports as % of	April-March		Exports as % of
	10-11	YoY Growth	10-11	YoY Growth	production	10-11	YoY Growth	sales
Bajaj Auto Ltd	3,844,503	34.21	1,203,718	35.08	31.3%	2,620,233	33.58	45.9%
Hero Honda Motors Ltd	5,408,694	17.68	133,063	36.20	2.5%	5,269,381	17.03	2.5%
Mahindra & Mahindra Ltd	355,041	20.44	17,138	62.18	4.8%	336,906	19.73	5.1%
Maruti Suzuki India Ltd	1,273,361	23.88	138,266	-6.31	10.9%	1,132,739	30.08	12.2%
Tata Motors Ltd	802,535	33.44	58,048	69.42	7.2%	745,325	22.29	7.8%
TVS Motor Company Ltd	2,072,241	34.97	246,635	47.57	11.9%	1,800,033	31.39	13.7%

 
o         DEPB stands for Duty Entitlement Pass Book. It is a scheme which is offered by the Indian government to encourage exports from the country. DEPB means Duty Entitlement Pass Book to neutralise the incidence of basic and special customs duty on import content of export product. This is provided by way of grant of duty credit against the export product at specified rates. The DEPB Scheme which was notified on 1/4/1997 consisted of (a) Post-export DEPB and (b) Pre-export DEPB. The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book at a pre-determined credit on the FOB value. The DEPB allows import of any items except the items which are otherwise restricted for imports.
 
 
o         The DEPB scheme was introduced in 1997, allowing exporters to earn duty credit at a notified percentage of the FOB value of exports. The DEPB rates are notified based on an assumption that the exporter has used duty-paid imported inputs, whether or not he actually does. This assumption brings in an element of subsidy.
 
So, right since 2001 there have been proposals to do away with the scheme but for want of a suitable alternative, it got periodic extensions.
 
Last August, the commerce minister said, "Despite the fact that this scheme had clearly been identified for early sunset, we extended it till December 31, 2010, in view of the difficult international economic situation and contraction of demand in developing economies." He said recognising the fragile recovery and prevailing uncertainties, he had been able to obtain extension of DEPB one last time for a further period of six months till June 30.
 
The thinking in the finance ministry seems to be that in recent months the global economy has recovered and exports have shown robust growth, exceeding the 2010-11 target. Second, Budget calculations were based on a projected nine per cent GDP growth but actual growth is more likely to be eight per cent. So, in the interest of fiscal consolidation, some subsidies need to be cut, DEPB being one.
 
On the other hand, the commerce ministry seems to believe the trade deficit is still high and there is continued uncertainty regarding international crude oil prices, impact of the earthquake in Japan and sustainability of global economic recovery. Therefore, this is not the time for doing away with DEPB, the most popular and exporter-friendly scheme for more than a decade.
 
In a recent interaction with exporters, the director general of foreign trade said the commerce ministry would try to persuade the finance ministry to continue the scheme for some more time. But, the tough stance of the finance ministry on income tax breaks under the SEZ and EOU schemes is a cause of worry for exporters. A possibility is the commerce ministry may offer to prune the DEPB list to sectors that need support and ask to retain the scheme. In any case, the uncertainty regarding continuation of the scheme must end.

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Thanks & Regards,
Abhishek Kothari
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