It is reported that with the aim of getting the Duty Entitlement Passbook Scheme extended, Mr Anand Sharma commerce and industry minister is set to hold talks with finance minister Mr Pranab Mukherjee.

DEPB, a popular duty reimbursement scheme, was introduced 14 years ago and is set to end on June 30th 2011. The scheme had been granted extensions on several occasions in the past due to demand from exporters.

Speaking on the sidelines of the India Africa Forum Summit that concluded recently, Mr Sharma said that "We will be meeting the Finance Minister and his team soon to explain the concerns of the exporters. We will take up the issue of DEPB and also interest subvention."

It may be recalled that after the withdrawal of the interest subvention scheme by the government, the cost of credit had climbed to 11% from 7%. Besides, banks have also hiked their base rates, adding to exporters' concerns.

The minister believes that withdrawing such incentives would hamper exports, hurt the economy and continue to widen the trade deficit. Also, with oil prices having climbed to unprecedented levels, boosting exports was a necessity.

Presently, exporters shell out a slew of state level and other kinds of taxes such as electricity tax, octroi, sales taxes, central sales taxes, none of which is rebated owing to the federal political structure and a convoluted tax structure. All of these taxes are expected to be subsumed in the proposed goods and services tax.

A study conducted by the National Council of Applied Economic Research found that the impact of such taxes ranges anywhere between 1.5% and 12%. Even the Ministry of Commerce and Industry has not succeeded in finding an alternative to the DEPB, though discussions have been on since five years.

Considering the high interest rates, the minister feels that a differentiation needs to be made between amount of credit and cost of credit.

Mr Sharma said that "The situation is difficult though exports are growing at an impressive rate. We have had internal assessment within the ministry and we are looking forward to a very substantive meeting with the finance ministry upon my return."

Earlier this week, revenue secretary Mr Sunil Mitra, had said that the government had taken the decision to discontinue the DEPB scheme in order to save revenue. The government currently reimburses duties worth around INR 8,500 crore each fiscal under the scheme.

Considered a direct subsidy under the World Trade Organisation rules, trade partner countries have been putting pressure on the Indian government to do away with the scheme.

(Sourced from Exim News Service)