The World Trade Organisation’s (WTO) dispute settlement panel recently concluded that India’s domestic export incentive schemes are inconsistent with international trade norms. With this ruling India lost a case filed by the United States at the WTO against such incentives and will have to re-work these incentive schemes to comply with WTO norms. India, however, will appeal against the ruling of the panel, according to a report.
The United States had filed a case against India under the WTO’s dispute settlement mechanism over latter’s export incentive schemes, including Merchandise Exports from India Scheme (MEIS); Export Oriented Units (EOUs) and Export Promotion Capital Goods (EPCG) Scheme; and duty free imports scheme. The former alleged that these schemes were harming US firms.
The dispute panel in its report has concluded that most of these schemes are inconsistent with certain provisions of WTO’s Agreement on Subsidies and Countervailing Measures. It suggested India to withdraw the prohibited subsidies under the Duty Free Import Scheme (DFIS) within 90 days from adoption of the report.
India should also withdraw the prohibited subsidies under the EOU, Electronics Hardware Technology Park (EHTP), Biotechnology Park (BTP), EPCG and MEIS schemes within 120 days and the Special Economic Zone (SEZ) scheme within 180 days, the panel recommended. The exemptions from customs duties on import under the EOU, EHTP and BTP schemes are subsidies contingent upon export performance inconsistent with certain articles of the agreement, the ruling said.