Introduction of anti-absorption provisions
RODTEP
First safeguard investigation for quantitative restrictions
Government launches production-linked scheme
India's sugar subsidies challenged in WTO
Rejection of DGTR recommendations by Ministry of Finance
Free trade agreements
Comment
The year 2021 saw various developments in the Indian trade sector. With the industry still trying to recover from the impact of the covid-19 pandemic, the government has introduced various measures to provide support. This article explores the legislative highlights of 2021 and offers an optimistic outlook on what is to come.
Introduction of anti-absorption provisions
In the 2021 budget, the Ministry of Finance introduced anti-absorption provisions with respect to both anti-dumping duties and anti-subsidy duty by inserting section 9A(1B)1 and section 9(1B) in the Customs Tariff Act. In October 2021, the government notified rules for conducting anti-absorption investigations.(1) Absorption of duties refers to a situation where the export price decreases subsequent to imposition of duties, or when the resale price in the domestic market does not increase. Absorption of duties may take the form of:
- a decline in export price;
- no increase in the resale price by the importer; or
- inadequate increase in the resale price of the importer.
2021 also saw the introduction of the Remission of Duties and Taxes on Export Products (RODTEP) scheme. The scheme has been applicable from 1 January 2021 and was formed to replace the existing Merchandise Exports from India Scheme (MEIS). The scheme was introduced after the United States challenged the MEIS schemes on the WTO panel, and the panel held that the export subsidy programmes (eg, MEIS and EUO schemes) that the Indian government provided violated the provisions of the trade body's norms.
First safeguard investigation for quantitative restrictions
2021 also marked completion of India's first safeguard investigation for imposition of quantitative restrictions. Following an application that was filed by Deepak Fertilizers and Petrochemicals Corporation Limited on 4 November 2019, the Ministry of Commerce (DGTR) initiated its first quantitative restrictions safeguard investigation on imports of isopropyl alcohol. A detailed investigation was conducted for almost two years, and on 30 September 2021, the DGTR issued its final finding on imposition of quantitative restrictions. However, the safeguard measures have not been imposed so far.
Government launches production-linked scheme
The government also launched its ambitious production-linked incentive (PLI) scheme. The scheme has been launched in 13 sectors which will have a total outlay of 2 trillion Indian rupees (approximately $26 billion). The scheme is expected to boost production worth an estimate of more than $500 billion in five years. Some of the identified sectors where the scheme has been introduced are:
- electronic or technology products;
- high-efficiency solar modules;
- specialty steel;
- pharmaceutical drugs;
- telecom and networking products;
- food products;
- automobile and auto components;
- textile manufacturing; and
- advanced chemistry cell batteries.
India's sugar subsidies challenged by WTO
2021 also saw the WTO's recommandation to withdraw India's domestic and export support benefits provided to sugarcane producers. Australia, Brazil and Guatemala challenged the domestic support and export subsidies provided by India pertaining to sugar and sugarcane. The challenge was made on the ground that domestic support measures provided by the government to the sugarcane producers exceeded the permitted level of 10% of the total sugarcane production and acted inconsistently with article 7 of the WTO Agreement on Agriculture. Further, the export subsidies provided by the government were also inconsistent with article 9 of the WTO Agreement on Agriculture. The WTO panel has now recommended the withdrawal of these subsidies.
Rejection of DGTR recommendations by Ministry of Finance
The Ministry of Finance has rejected a large number of recommendations proposed by the DGTR by issuing office memorandums merely stating that the government had decided not to impose anti-dumping duties. Aggrieved by the decisions of the Ministry of Finance, appeals were filed before the Customs Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT had held that, while government has a discretion to impose the duties, it needs to be exercised in a judicious manner by a reasoned order. Further, the CESTAT also held that, as argued by the government, "superior public interest" can be a reason for not imposing duties but government needs to provide an explanation for this. The order gave significant respite to Indian industry. However, the government has now filed a writ application in the Delhi High Court, the outcome of which is pending.
On 18 February 2021, India and the United Arab Emirates signed a comprehensive economic partnership agreement (CEPA). The United Arab Emirates are India's third largest trading partner. The year also saw significant development in the India and Australia Comprehensive Economic Cooperation Agreement. Bilateral trade between India and Australia stood at around $12.5 billion from 2020 to 2021 and has already surpassed $17.7 billion in the first 10 months of first quarter of 2022. India is also in the process of negotiating free trade agreements with the United Kingdom, Canada, the European Union and Israel (for further details please see "India and United Kingdom launch FTA negotiations").
With the economy still recovering from the pandemic, some of these measures offer an exciting opportunity to Indian producers to develop a hold in the global market. Despite the uncertainty due to covid-19, there is reason for optimism in India, as it has been projected that the country's exports for the financial year 2021-2022 will cross the $400 billion mark. While some of the developments are expected to act as a bottleneck for India's exports, reforms introduced by the government are expected to provide a significant boost to India's exports. It is fair to say that favourable times lie ahead for Indian producers.
For further information on this topic please contact Kalpesh Gupta at TPM Solicitors & Consultants by telephone (+91 11 4989 2200) or email ([email protected]). The TPM Solicitors & Consultants' website can be accessed at www.tpm.in.
Endnotes
(1) Notification No. 84/2021-Customs (NT) dated 27 October 2021.