The news that the Duty Entitlement Passbook (DEPB) Scheme will continue for three more months has brought considerable relief to anxious exporters. All credit goes to commerce minister Anand Sharma for persuading the finance minister that a suitable alternative has to be put in place before discontinuing the scheme.
The reprieve comes at a time when costs are going up for the exporters. Despite the good growth that exports have shown over low base figures, anxiety is mounting that increased costs will make it difficult to keep up the momentum. In particular, smaller exporters are finding it difficult to cope with higher interest costs, higher labour costs, higher raw material costs and overall inflation in the domestic economy.
A suggestion doing the rounds is to expand the All Industry Rates (AIR) of Duty Drawback to cover all the items in the Standard Input Output Norms. This suggestion was put forward by the Kelkar Committee a few years before. The finance ministry started acting on it by bringing in about 1,500 chemical items in the AIR schedule in 2005 but thereafter inexplicably, slowed bringing in of more items.
Duty Drawback through AIR is a very low-cost scheme for exporters because the drawback amount is directly credited to the exporter’s bank account. However, it is not as popular with many exporters as the DEPB scheme because they get much lesser under the AIR scheme than under DEPB.
Federation of Indian Export Organisations president Ramu Deora, in a memorandum to the Prime Minister in 2009, suggested doing away with most of the messy export promotion schemes and reviving the Cash Compensatory Support (CCS) Scheme in their place. The idea was to quantify the disabilities of exporters in terms of un-rebated taxes, higher interest rates, higher freight costs etc. for various sectors and notify suitable CCS rates. To lower the costs involved in actually getting the benefits under various schemes, Deora had suggested CCS be disbursed by banks when payment for exports is realised.
Another suggestion that Deora had given in the memorandum was to allow Cenvat Credit of basic customs duty to exporters and to grant drawback of the duties for exporters who do not avail of it.
While merits of such suggestions can be debated, what is necessary is that exporters must take up the onus of suggesting viable alternatives to the DEPB scheme. In the past, many meetings have been held but exporters have been woefully short of sensible ideas. It is time they stopped putting pressure on the government to continue the DEPB scheme and put in some honest efforts to search for suitable alternatives. The commerce ministry must also stop looking for alternative schemes that will benefit its staff at the various offices of the Director General of Foreign Trade (DGFT). In fact, many exporters lose their benefits or compensations to corrupt elements in the offices of customs, excise and DGFT. It is time to work towards corruption-free export promotion schemes.