Ten times increase in exports required by 2017: Assocham

New Delhi, Sep 28 (PTI) Concerned with the continuous fall in India's share in the world trade, Assocham has called for hiking the country's export potential 10 times by 2017 and increase foreign direct investment. "In view of 380 per cent negative growth recorded in India's share of world trade in over 60 years, from three per cent in 1947 to 0.8 per cent now, India needs to hike its export potential by 10 times in next 10 years with inserting efficiency in manufacturing, services and governance," an Assocham statement said.

In a paper on 'Cost Competitiveness' it said, focus on export competitiveness will result into increased FDI inflow which should be enhanced to about 100 billion dollar per annum by 2017, the current ceiling for which is estimated at 10 billion dollar.

The paper suggests that good governance can unlock India's latent potential and push it to achieve 10 per cent GDP growth rate every year, provided a relevant manufacturing policy is put in place and focus is also laid on creating hundreds of coastline economic zones in the next 15-20 years with economic incentives.

Also, the chamber said, Non-Resident Indians should be encouraged to park their surpluses in the country as 20 million NRIs save about 80 billion dollar per annum. PTI

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China emerging as global wool processing centre

Beijing, Sept 21 (PTI) China, dubbed as the world's factory, is also emerging as a new global wool processing centre but at the cost of environmental degradation, the state media reported. China processes more than 400,000 tonnes of wool a year, one-third of the world's total.

It imported 2,02,000 tonnes of wool in the first seven months of this year, up 26.8 per cent on the same period of last year, the General Administration of Customs said.

Customs sources said the increase in imports was largely due to short supply and mounting demand at home, as the global wool processing centre is shifting to China.

However, growing imports have aggravated environmental concerns in the wool processing industry, Xinhua news agency reported.

The wool scouring and processing techniques result in different poisonous chemicals being released in the waste water.

But many domestic enterprises do not have advanced processing techniques and sound environmental protection awareness.

The algae outbreak this June in Taihu Lake, the nation's third biggest freshwater lake in east China, was partly due to the discharge of waste water from the huge number of wool processing mills located around the lake, whose overall processing capacity accounted for 70 per cent of the nation's total, the report said.

Chinese officials have urged local wool enterprises to update their technology, establish sound industry standards and reduce the potential hazards for the environment. PTI

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Govt to rethink if exporters' package doesn't work

WASHINGTON: Union Finance Minister P Chidambaram has said if the package offered to exporters in the wake of the appreciation of the rupee against the US dollar is not sufficient, the government would have to think of ways to help them tide over the rest of the year.

"It (rise of rupee) has some consequences, particularly for exporters," Chidambaram said.

"Exporters have been taken by surprise. We offered them a package a couple of months ago but if that is not adequate then we would have to think of ways and means by which they can be given a helping hand to tide over the rest of the year," he added.

"But in the medium to the long run, exporters would have to learn to hedge to reprice their export contracts in tune with exchange rates," the Finance Minister said.

Chidambaram would not answer the query if the government was thinking of intervening to buy American dollars so as to get over this situation.

"Monetary policy is the province of the Reserve Bank of India. Even if I give advice which I rarely do, I would give it privately to the Governor (of RBI)," the Minister added.

Chidambaram was on a brief visit to Washington from New York yesterday. During the course of the trip, the Minister had a luncheon meeting with Treasury Secretary Henry Paulson, spent time with the editorial staff at Bloomberg and addressed the Peterson Institute for International Economics. He left Washington for New York later in the evening.

He maintained that his meeting with the US Treasury Secretary was a general review of matters.

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India supports Canada on anti-dumping row with US

NEW DELHI: India and China have informed the World Trade Organisation (WTO) that they share concerns of Canada over the Bush administration not repealing a law in full under which the US has been imposing duties on imports and diverting the receipts to the domestic industry.

Under a ruling of the Dispute Settlement Body of the World Trade Organisation, the duties on imports collected after September 30 will no longer be subject to the Byrd Amendment.

Formally known as the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), the Byrd Amendment diverted money from the imposition of anti-dumping and countervailing duties from government coffers directly to companies that petitioned for those duties.

The law had offended several nations, including India, Canada, the EU, China and Thailand whose products were being subjected to anti-dumping duties.

While Canada has welcomed the fact that duties on imports collected after 30 September 2007 will no longer be subject to the Byrd Amendment, it "regretted" that duties collected before 1 October 2007 would continue to be distributed to the US industry.

Canada said, "it was disappointed that the US would not take action to repeal the Byrd Amendment in full," a WTO statement said.

It said Thailand, India and China also supported the Canadian cause. Others which opposed funding of the US domestic industry by duties on imported goods included Japan and Brazil.

The US industry would receive about 279 million dollars, according to the preliminary figures calculated by the US trade authorities.

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India, China look to make regional trade arrangement feasibile

BEIJING: Buoyed by surging bilateral trade, China and India have made progress in joint research on the feasibility of initiating a regional trade arrangement (RTA), China's Ministry of Commerce announced here on Thursday. The two sides met in Beijing for a two-day consultation, which ended yesterday, and reached a basic agreement on cargo and service trade, investment as well as trade and investment facilitating measures, ministry spokesman Wang Xinpei said.

The consultation was the fifth of its kind since March 2006, and the two countries planned to conclude the research at the sixth consultation meeting to be held in New Delhi by October, Wang said.

The two sides would then decide whether to start free trade agreement (FTA) negotiations.

The first four months had seen trade between China and India surge by 56.8 per cent year-on-year, the highest among all the major trade partners of the world's fourth largest economy, to $11.4 billion, Xinhua news agency quoted Chinese customs statistics as saying.

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China puts Indian sugar under lens

NEW DELHI: China, which has bought around 100,000 tonnes of Indian white sugar this year, held back some supplies for tests, a senior Indian trade official said on Thursday, while another source said quality issues had been resolved.For the first time, Chinese importers have braved maximum tariffs to buy cheap Indian sugar, even though the home harvest is expected to hit a record high.

The export shipments were mainly for September and October delivery. “Several trading firms had contracted the sales to China and out of it some material was held back by the Chinese authorities over quality issues and this was being retested,” one industry official, who could not be named, said.

But another trader with a global firm said that while small quantities had been subjected to microbiological tests these had since been forwarded to customers.

He said 70,000 tonnes had already been shipped to China. Chinese buyers have contracted some 100,000 tonnes of Indian sugar at a tariff rate of 50%, assessed on imports that do not fall within the tariff rate quotas (TRQ) system agreed when China joined the World Trade Organisation.

Normally, Chinese mills and traders do not import unless they hold quotas for the lower tariff rate of 15%. This year, Beijing only granted 30% of its 1.9 million tonnes of TRQs to private companies.

India is likely to produce more than 30 million tonnes of sugar in the new season beginning in October, up from an estimated 28.3 million tonnes in the current year, trade officials said. India has so far exported 1.8 million tonnes of sugar, mostly whites, in the year to end-September.

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OECD raps India's SEZ policy

New Delhi: Following the criticism of India's special economic zones (SEZ) by the IMF and the World Bank, the Organisation for Economic Cooperation and Development (OECD), an inter-governmental think tank of 30 rich industrial countries, too has cast doubts about the viability of SEZs in delivering results without widening the existing divide and entrenching distortions in the economy.

In a forthcoming study by the Paris-based OECD on "Realising the Potential of India's Trade Integration" to be discussed in a workshop by CUTS International, a non-Governmental organisation, on September 21 here, the OECD economists, Premyslaw Kowalski, and Nora Dihel contend that "it is doubtful whether export-related duty exemptions and preferential treatment of economic agents operating in the SEZs are the best way to promote economic efficiency and growth".

Negative incentives

The study said that the 2005 trade-weighted average tariffs of close to 52 per cent in agriculture and 12 per cent in manufacturing still imply a significant wedge between domestic and world prices and act as an indirect tax on export through imports. This puts many domestic producers that rely on imported inputs at a competitive disadvantage while shielding uncompetitive domestic producers from competition.

"Maintaining moderately high import tariffs along with a system of export-oriented duty exemptions can be characterised as a system of `negative incentives' where a common denominator means costs of production that are higher than in other less protected emerging markets with the exception of those that are currently competitive. This is bound to have a negative impact on the Indian economy in general and perhaps even on exports since this activity is also carried out within an inefficient national economy, they said adding that as much as 75 per cent of capital formation in the SEZs emanates from domestic sources.

The authors ask whether it is wise to promote exports through a dual system of taxing the national economy with inefficiencies and simultaneously promoting selective investments in exporting activities within the SEZs.

On duty cuts

The study said that an across-the-board import duty cuts could have more beneficial economy-wide and export effects than selective duty exemptions in export sectors. A brief assessment of Indian operations and fiscal implications of Indian SEZs to date, the OECD study said, suggest that the value added generated annually by the SEZs might be rather close, if not lower, than the amount of tax revenue foregone, given that the share of costs of intermediate inputs in the final value of Indian products often substantially exceeds 50 per cent. It is precisely on this proposition that the Ministry of Finance has been attacking the sops provided to SEZs rather in a veiled way and also got the revenue foregone by such sops included in the expenditure budget document in recent years.

The RBI has also voiced reservations in lending to SEZs stating that they should be treated as real estate business, even as the Commerce Ministry wants the SEZs to be treated as infrastructure project for investment purposes by the commercial banks.

More suggestions

The OECD report argues that this and other elements in its analysis suggest that the economic benefits of the SEZs in India are open to question, despite the private sector support and the government's gusto. As a recent OECD study underscored, SEZs are always a "suboptimal policy from an economic point of view" as they could merely provide a palliative to "countries with poor business milieu where bridging deficiencies at a national level is temporarily impossible."

While this may appear to be the case in India - a large, low income country with enormous population, poor infrastructure and fiscal problems - it would not be rational to treat this as "a sustainable, long-term solution that can substitute for reforms aimed at making business easier for everyone", the economists argue.

They said India's dynamic, sustained and balanced economic growth could continue only if it manages to harness the growth of its human capital by sustaining improvements in investment and productivity.

"It is doubtful whether export-related duty exemptions and preferential treatment of economic agents operating in the SEZs are the best way to promote economic efficiency and growth".

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Centre may lift ban on export of milk powder

NEW DELHI: Bowing to the demand from milk federations, the Central Government may not extend the ban on export of milk powder that expires on September 30. The ban was enforced in February this year to stem the domestic shortage of skimmed milk powder and to check the rising price of liquid milk.

Since the prices of skimmed milk powder and milk powder had hardened in the international market, they were not being imported, resulting in a decline in the availability of liquid milk and frequent hike in milk prices.

Recently, the Gujarat Cooperative Milk Marketing Federation Limited met Agriculture and Food Minister Sharad Pawar seeking lifting of the ban on import of milk powder.

Their argument was that due to the increase in the cost of cattle feed inputs such as deoiled cake, rice bran oil, maize, jowar etc., they have had to pay up to 25 per cent higher price to their milk producers.

In comparison, the increase in the price of milk and milk products had been “only 16 per cent” compared to vegetables (52 per cent), deoiled cake (46 per cent), groundnut oil (46 per cent) and pulses (18 per cent).

The Federation said the international milk powder and butter oil prices had shot up due to the European Union subsidy to exporters as well as the reduction in milk production in Australia due to successive droughts.

Besides, in their estimate, they had a good opportunity to establish a “foothold” in the international market owing to the rise in the demand for milk and milk products “due to high GDP growth rates” in China, south-east Asia, the Middle East and India’s key neighbouring markets.

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Tirupur textile workers bear the brunt of the rising rupee

Kochi: The rising rupee that breached the psychologically crucial Rs40 to $1 level last week is set to claim its first victim: a large number of the 350,000 or so workers in the textile town of Tirupur, in Tamil Nadu, may lose jobs as exporters are finding it difficult to keep the mills running.

The trouble for these workers actually started a few months ago with the steady rise in the rupee and exporters finding it difficult to increase volumes. Some textiles mills in this southern state have already started resorting to partial layoffs through reduction in production and doing away with their night shift.

In “Tirupur alone, around 7,000 employees have been rendered jobless and the situation can turn worse affecting the livelihood of the majority of the workers and their families,” says A. Saktivel, president of the Tirupur Exporters Association. Tirupur hosts around 6,000 textile units.

A large number of retrenched workers from Karur, Tirupur and Coimbatore are seeking jobs in Madurai. The rising rupee is drastically bringing down the export earnings when dollar income is translated into local currency. The Indian currency is Asia’s best performing currency this year, rising some 11% against the greenback. This means an 11% drop in earnings for exporters if the volume of exports and prices remain the same.

The knitwear industry in Tirupur, which had an export turnover of Rs11,000 crore during fiscal 2006-07, is set to see a 6-7% decline in volume of business this year, says Saktivel.

“The first half of this financial year has been pretty bad. With no new orders coming in, we are considering laying off people. There is no other option before us,” says Saktivel.

The industry so far has been trying to buy time for booking new orders and hoping that the rupee would stabilize. However, the local currency has strengthened further last week following the US Federal Reserve Bank’s decision to cut its policy rate by half a percentage point to 4.75%.

Some 2,500 of textile factories in Tirupur are into knitting, another 1,500 into garment manufacturing, some 700 into dyeing and 400 into embroidery, with the rest into printing. It is one of India’s largest textile clusters housing 100% export-oriented units. The first export consignment left Tirupur in 1978 and until 1985, annual exports were less than Rs10 crore. The turnover touched Rs1,000 crore in 1991 and since then it has growth 11 times.

Saktivel sees little chance of exports of garments and knitwear to the US going up. Admitting that the industry needs to accept the fact that situation may remain grim for sometime, he is lobbying for measures to help the industry tide over the crisis.

One of the measures the association has been asking for is a lowering of interest rate on the pre-shipment and post-shipment credit given to exporters. Right now, the exporters pay around 13% for such short term facilities.

P. Rajendran, president of the Madurai Spinners Association, says that with the rising rupee export earnings of textiles firms are going down, forcing them to cut down production and do away with night shifts.

According to him, a large number of retrenched workers from textiles mills in Karur, Tirupur and Coimbatore in Tamil Nadu are seeking jobs in Madurai, which houses 120 mills with combined annual revenues of around Rs1,440 crore. Madurai does not have any fully export-oriented textiles unit but exports still account for about 40% of sales.

He says apart from bringing down interest on bank loans, the government should also pare the duty on import of cotton from the 10% to 5%.

In order to offer relief to textiles mills, the government last week announced service tax benefits for transporting goods to the port as well as on port handling charges, but Saktivel is not convinced of the efficacy of such a move. “The claim for refund of 12% service taxes for transport of goods from the inland container depot to the port of export and port handling charges will be negligible,” he says.

According to him, all services incurred by exporters including sourcing of raw materials should be exempted from payment of service tax. The government should also consider sops for exporters to offset the impact of various state taxes and levies, he says.

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Rupee rise will hurt export growth

NEW DELHI: The appreciating rupee is expected to hamper export growth while encouraging imports and thereby the country’s trade and current account deficits are likely to come under pressure, the economic analysis wing of Moody’s, the global credit rating agency has said.

In its report on India titled ‘India Outlook: The Elephant’s Charge Expected to Slow’, Moody’s Economy.com has said: “… the strong rupee will continue to temper the expansion of India’s export sector and support import demand, putting even more pressure on the country’s gaping trade and current account deficits”.

In just the first four months of the current fiscal year, the trade deficit, according to official data, has already increased by 61 per cent at $25,619.85 million as compared to $15,841.22 million during the same period a year ago.

Lower export target

While the growth in exports, fixed at $160 billion for 2007-08, is expected to be at a brisk pace during the current calendar year, it is the deceleration in global demand coupled with the effect of a strong rupee that is likely to put pressure on the country’s export sector, the report said.

Mainly responsible for this state of affairs would be the slowdown in import demand from the U.S., which generally accounts for a large chunk of India’s total exports.

In a large measure, the neutralising factor would be the healthy import demand from China as it would continue to cushion much of the impact of a slowdown in shipments to the U.S., the report said.

BPO may take a hit

Moreover, as India’s services exports, in particular, business process outsourcing would remain resilient, “we expect export growth to book double-digit gains again this year,” the report concluded. Also, another reflection of the economy remaining buoyant would be the strong demand for inbound shipments owing to the country’s heavy dependence on imported energy, machinery and capital equipment for infrastructure development, it said.

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Strong Re emerges as top impediment for exporters

A robust rupee has emerged as the most crucial impediment for 91 per cent of the country's exporters and outlook for the next six months does not look bright, a FICCI survey has said.

The survey conducted in the first quarter of 2007-08 revealed that for 91 per cent of respondents from 286 companies across various industry sectors, appreciating rupee was the main impediment to business performance.

In the last survey conducted by the Chamber in the last quarter of 2006-07, 75 per cent of exporters regarded currency appreciation as the primary risk factor.

It showed that the new situation arising out of dollar depreciation against rupee is forcing exporters to improve business in other currencies and to establish protective clauses in their contracts. "The concern is widespread amongst small, medium and large companies alike. The members of the exporting community have indicated that they are now taking steps to fortify their defenses," a FICCI statement said.

It said exporters are using mechanisms such as forward contracts, shifting to other currencies and establishing protective clauses in their newly set contracts.

"Exporting more to regions like the Middle East and the European Union, a strategic move to partially nullify the impact of the strengthening rupee vis-a-vis the US dollar, is also being resorted to by some exporters," the survey said.

Exporters saw rising prices of raw materials a major constraint in staying competitive at the global level. The results of the present survey showed that nearly three- fourths of the respondents have been hit due to the rising cost of raw materials.

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Remove ban on milk powder exports

Chennai, Sept. 13 With the Centre expected to review the ban on export of skimmed milk powder after September 30, the dairy industry is anxious that the ban be lifted. The industry believes that it would be possible to put in place a more pragmatic system that would protect the domestic supply of liquid milk while allowing the dairy industry to export the surplus in the form of milk powder.

According to Mr R.S. Sodhi, Chief General Manager, Gujarat Cooperative Milk Marketing Federation, it would be possible for the Government to put in place a system that would ensure sufficient availability of liquid milk in the domestic market while allowing export of surplus as milk powder. With the flush season around the corner, milk arrivals would peak and the surplus would have to be exported. Unless the surplus is exported, the dairy units would be affected which in turn would affect milk procurement and the dairy farmers.
Export tax

Mr R.G. Chandramogan, Chairman and Managing Director, Hatsun Agro Product Ltd, felt that a viable option would be the levy of an export tax and ensuring that the exports are in proportion to the volume sold in retail sales in the local market. A modvat-style benefit of the export tax could also be extended to those selling in retail in the domestic market. If the export ban were not lifted dairy units’ revenues would suffer which could result in the milk price paid to farmers being cut. Referring to the increase in milk production, he said, Tamil Nadu and Andhra Pradesh alone produce over 26 lakh litres milk a day, a 30 per cent increase over last year. The national production, according to industry statistics, is in excess of 100 million tonnes a year. Of this only about 17 per cent is procured and marketed by the organised sector.
Ban no solution

Dairy farmers have benefited through the support in the form of additional revenue and financial assistance to farmers. Over two-thirds of the market price of milk goes to the farmer as the purchase price. The ban on milk powder exports affects the performance of the dairy units and the support to the farmers. The ban is no solution because the quantity of milk retained in the domestic market is insignificant. For instance, the 40,000 tonnes of milk powder exported in 2005-06 is the equivalent of about 13 lakh litres of milk, he said.

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Govt offers tariff concessions on imports from Chile

NEW DELHI: In an effort to boost bilateral trade, the Centre has announced tariff concessions under a Preferential Trade Agreement (PTA) on imports from Chile. According to a notification, the government has fixed tariff preferences ranging from 10 to 50 per cent on 164 products.

Copper and concentrates will attract 10 per cent of duty, whereas, for most of the other items it would be between 15 and 20 per cent.

Some products like food grain would attract 50 per cent duty.

India and Chile entered into a PTA last year in a bid to increase bilateral trade and investment. It was the first time that such an agreement had been signed between India and any individual Latin American country.

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Govt gets Rs 18,623 crore through customs, excise duty in Aug

New Delhi, Sep 12 (PTI) Customs and excise duties have added Rs 18,623 crore to the government kitty in August this year, 12.8 per cent more than the corresponding month last fiscal. This took the total tax collected through the two levies during the first five months of this fiscal to Rs 85,039 crore, up 11.9 per cent over Rs 76,005 crore a year ago.

Excise duty collection, which otherwise was lagging behind, grew by nine per cent in August to touch Rs 9,898 crore over Rs 9,082 crore in the same month last year. The collection in July was up 2.1 per cent year-on-year.

For April-August, excise duty collections grew by 6.3 per cent at Rs 44,469 crore.

Customs duty yielded 17.5 per cent more revenue at Rs 8,725 crore for August. For the first five months, the customs duty collection was up 18.7 per cent at Rs 40,571 crore.

Services duty collections were robust, growing by 36.4 per cent at Rs 3,532 crore in July this year, against Rs 2,589 crore in the same month last year.

The levy fetched Rs 13,636 crore for the first four months of this fiscal, up 38.5 per cent over Rs 9,849 crore in the corresponding period last year.

All the three indirect levies yielded Rs 21,173 crore in July, up 12.3 per cent over Rs 18,847 crore in the same month last year. PTI

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Pawar: No plans for further wheat imports

Faced with a volley of criticism over its decision to import nearly eight lakh tonnes (lt) of wheat at $389.45 a tonne (nearly Rs 16 a kg), the Centre has seemingly changed tack.

Till recently, the official position — constantly reiterated by the Union Agriculture Minister, Mr Sharad Pawar — was that the Centre would come what may import 50 lt of wheat in the current fiscal. With contracts for 13 lt finalised so far, it would mean floating of further tenders by State Trading Corporation of India (STC) for the balance 37 lt.

Pawar interview

But in an interview to a news agency here on Wednesday, Mr Pawar has said there were no immediate plans to issue more tenders and the country will not import wheat “in a hurry”. Further, the Chairman of Food Corporation of India (FCI), Mr Alok Sinha, has been quoted as saying that the country has sufficient stockpiles of wheat and the new season, beginning April, will open with 50 lt inventories — 10 lt more than normative the minimum buffer norm.

Concern

“These statements indicate that the Centre is concerned over the possible political fallout of importing at prices way above what is being paid to farmers here,” sources pointed out. In fact, Mr Pawar’s comments came on a day when the Delhi High Court sought the Centre’s response on a public interest litigation (PIL) challenging the imports. According to the sources, the decision to import has also been questioned by voicing within the Government and the ruling alliance. “For the Finance Ministry, the main issue is that if imports are made at Rs 16, against the procurement price of Rs 8.50, it would be very difficult to resist pressure on increasing the minimum support price to Rs 10 plus. And with global prices going up even further since the last tender, further imports now would be both economically as well as politically unviable”, the sources added.

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Saudis worry as Indian rice cost rises nearly 60 pc

DUBAI: There is growing concern in Saudi Arabia about the price hike in Indian Basmati rice by nearly 60 per cent, but Indian officials said the rise in prices is largely market-driven.

The 60 per cent hike in the price of Indian rice is not only market-driven but also partly due to the appreciation of the Indian rupee vis-a-vis the Saudi riyal, Rajeev Shahare, deputy chief of mission in Riyadh, said on Tuesday.

Shahare said there were various factors responsible for the situation since this particular variety of rice was grown only in Dehradun and because of its superior quality it was much in demand compared to other cheaper varieties, Arab News reported.

He, however, rejected suggestions that suppliers are hoarding stockpiles of the grain to boost prices.

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Asean FTA may be a no-show

NEW DELHI: The much-hyped proposed free trade agreement (FTA) between India and Asean seems to be running into trouble. Asean’s demand that India bring down Customs duties on four sensitive agricultural commodities to levels much lower than what New Delhi finds ‘acceptable’ has put a question mark over the deal. According to commerce and industry ministry officials, India is not ready to be pushed around any further and would choose to opt out of the agreement if Asean doesn’t lower its demands.

In an official-level meeting last month-end, both India and Asean decided to make last-ditch efforts to save the proposed pact. However, sources said nothing could move till the Asean countries gave up their demands. Asean has said India should cut Customs duties on palm oil to 30% and on tea, coffee and pepper to 20%.

India feels this demand is unrealistic. “India has already agreed to bring down duties on all four products to 50% from about 100% at the time negotiations began. It is totally unrealistic of the grouping to expect India to agree to lower levels. We have to protect the interests of our farmers,” a commerce ministry official said.

Since Asean countries, especially Malaysia and Indonesia (the prime producers of palm oil), are unwilling to budge, it seems unlikely that a bilateral agreement between India and the Asean countries would be ready by the Asean summit in Singapore scheduled for the third week of November. The 10-member Asean comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The framework for an comprehensive economic cooperation agreement (CECA) between India and Asean was signed in October 2003 during the second Asean-India summit. The idea was to move towards a free trade regime for trade in goods and services.

The going for the deal was rough from the beginning as the early harvest programme involving duty cuts for a handful of items, which was to precede the FTA, had to be dropped due to differences over rules of origin (ROO).

The ROO defines which products should qualify as products originating from the partner country and which should be treated as imports from third countries.

India finally agreed to water down its version of the ROO to coax Asean to move ahead with talks. Although the two sides ultimately agreed on a ROO, there were differences over the negative list of items (items to be excluded from the FTA) which India wanted to maintain.

Officials said since India agreed to prune its negative list to just 490 items, the shortest list it has maintained with any country or bloc, it was proof enough of its interest in making the FTA happen.

“The ball is in Asean countries’ court. They either accept what has been offered or forget the deal altogether,” the official said.

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To enhance textile exports, govt set to import hire-and-fire norms

NEW DELHI: The warp of labour reforms may be laid in the textile sector. The textile ministry has proposed an amendment to the Industrial Disputes Act, 1947, for letting textile exporting units hire and fire.

“Several state governments have already liberalised labour laws to attract investment and promote large-scale manufacturing. The labour ministry is taking note of the developments, and is likely to give nod for labour reforms in certain sectors. This could be started with units facilitating exports,” labour ministry sources said.

The textile ministry has already moved a Cabinet note for limited amendment to the Industrial Disputes Act, sources added. According to the proposal, labour law restrictions would be eased only for textile exporting units providing a minimum employment guarantee of 100 days a year.

The textile ministry has also mooted increasing the working hours from 48 hours per week to 60 hours, and daily working hours from 9 to 12.

The Cabinet note moved by the ministry also seeks to put an end to wildcat strikes by increasing the notice period before a strike.

“It is imperative to address rigidities of labour laws so that the industry can realise the export potential and, thereby, create additional job opportunities,” a textile ministry official said.

Industry players are also of the view that the lack of flexibility in labour laws is hampering the textile industry’s ability to compete in the global market.

“Garment industry needs flexible labour laws to compete at world level. Compared to China, our labour productivity is 20% less. The government move is in the right direction. This should not be taken just as hire-and-fire norm as the flexibility will generate more employment in the textile sector,” Vardhman group chairman and CII working group textile head S P Oswal said.

With most of these units operating in export processing zones and other exports-facilitating industrial zones, it is felt that initiating labour reforms in this sector may remain non-controversial.

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UAE to review ban on Indian poultry products

DUBAI: The authorities in the UAE have decided to review a ban on Indian poultry products put in place since July after bird flu was detected in Manipur.

A high-level Indian delegation urged the UAE and Saudi Arabian authorities to ease the ban on Indian poultry products which has been imposed since the latest outbreak of avian flu.

"Since the majority of the imports (of Indian poultry products) came from Tamil Nadu, which was very far from Manipur, where the avian flu outbreak had taken place, we have asked the UAE authorities to allow the imports," K S Money, head of the Indian delegation and Chairman of the Agricultural & Processed Food Products Export said.

Talking to the media after meeting top officials of the UAE government yesterday, Money said the local authorities promised to look into the ban and review it.

He said the UAE ministry will refer the matter to the technical committee which will look into the issue soon.

The Indian team also apprised the government in both the UAE and Saudi Arabia about the status of the problem and steps to check the spread of the bird flu virus.

In May, at the first meeting of the India-UAE Trade Policy Forum, Indian Commerce and Industry Minster Kamal Nath had also raised the issue with the Gulf state's Minister of Economy, Shaikh Lubna Al Qasimi.

The UAE has imposed a temporary ban on the import of all kinds of birds and poultry products from India in July after avian flu was detected in Manipur.

The decision was taken as a precautionary measure following reports by the World Organisation for Animal Health on the emergence of bird flu cases in India.

India had confirmed the detection of bird flu in its remote north eastern state of Manipur on July 25.

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American Farm Bill endangers WTO talks

GENEVA: A small group of about 35 members, selected by the chair of the special session on agriculture discussing market access in developed and developing countries in the Green Room format have kicked off the WTO Doha Round negotiations on agriculture modalities. According to reports, the developed countries — the EU, Japan and the US — have not shown any signs of offering new concessions, thus preventing developing countries from making any new concessions.

The basis of discussions is the draft modalities paper of chairman Ambassador Crawford Falconer, which was accepted in end July by WTO members as a negotiable paper. At the end of this week, Mr Falconer will convene an informal meeting for all members for general statements and sharing of information, with most developing country members expected to defend their defensive interests and work hard to convince the chair and major players to concede to their positions.

Yet behind the business-like approach many delegations are concerned about the success of the negotiations, and the future if it fails. The blame game has already begun with USTR Susan Schwab, at the pre and post-APEC press briefings, calling Brazil, India, South Africa among those members who are “obstructing” progress, stating that “we are going to know a lot more in two days or a week whether our trading partners are negotiating in good faith”, pointing that a proposed formula in the NAMA text for cutting industrial tariffs applies to only 28 developing countries, however “are those countries going to step up”?

However it is the inability of the administration of President George Bush to have the Fast Track authority renewed, and the uncertainty over the 2007 US Farm Bill passed end July by the House of Representatives, that is casting a long shadow over the negotiations. The Farm Bill 2007 is also strongly criticised by the US administration for not making enough effort to reform and reduce US farm subsidies and making the US more vulnerable to legal action by its WTO partners.

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Food ministry may pay price, lose right to import wheat

NEW DELHI: The government is mulling the possibility of letting the commerce ministry handle the nitty-gritty of foodgrain imports from now on instead of the food ministry. An indication was given earlier this month that there may not be any more wheat imports this year following stringent opposition by both the finance and the commerce ministries. They contended that the exorbitant price for wheat would burden the exchequer and would be a waste of precious foreign exchange.

It is understood that the suggestion that the commerce ministry handle foodgrain imports from now on was made by the food ministry itself in reaction to queries on the sageness of earlier import decisions.

The group of ministers (GoM) handling the imports had asked the food ministry at a meeting in the first week of September to clarify why it chose to scrap the first import tender for wheat floated by STC on April 30, when 3.06 lakh tonnes of wheat was offered at an average weighted price of $263 per tonne. It also asked for a clarification on why the third tender for which the price quotes were substantially higher, at an average weighted price of $389.45 per tonne, should be approved.

In response to commerce ministry queries at GoM, the food ministry is understood to have responded that the timing for floating of the first tender on April 30 and the decision to later scrap it on May 29 was based on STC’s viewpoint which, while recommending the buy at $263/t c&f, had emphasised the chances of wheat prices softening beyond August 2007 on account of a good Australian wheat crop. The ministry also cited the May 24 report of the International Grains Council (IGC) which buttressed the view.

In defence of its decision to push for the finalisation of the third tender, which was floated on August 23 and the bids were opened on August 29 and finalised by GoM on September 3, the food ministry told GoM that the prognosis on the Australian wheat output, on which it earlier banked heavily to soften the import prices after its arrival in the global market in November-December, had changed in the interim between April and August.


Unlike the IGC, the United States Department of Agriculture (USDA), the Australian Wheat Board (AWB) and diverse other sources had indicated clearly earlier in the season, following the government’s decision to ban forward trading in the commodity, that wheat supply and prices would be tight. CBOT prices for December contracts were also a good indication of this.

The food ministry is now citing the CBOT indicators that price trends would remain high beyond December as the reason why they decided to finalise the third tender despite comparatively high prices.

Some agri economists are of the view that letting the commerce ministry handle the job would ensure a sharper perspective. They argue that importing for government’s programmes when the food ministry has enough stocks to cover supply to BPL and AAY sections, may not have been endorsed by the commerce ministry.

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New basmati definition to boost Indian exports

MUMBAI: India's proposal to expand the definition of basmati rice is likely to shore up India's position as the world's top basmati exporter and raise the number of varieties of aromatic rice exported, industry players said.Last week, junior federal farm minister Kanti Lal Bhuria said the new definition plans to do away with the condition that one of the parents should be a traditional basmati variety for the progeny to qualify as basmati. The proposal is with the commerce ministry for consideration. "There is a very strong possibility that India would be able to get an additional 10-15 per cent share in the international market after this move," said Gurnam Arora, joint managing director of basmati exporter, Kohinoor Foods Ltd .

The global market for basmati, a fragrant rice traditionally grown in the Himalayan foothills, is controlled by just two players, India and Pakistan. India has 67 per cent of the market. A re-definition could lead to more non-traditional varieties entering the basmati basket, giving consumers a wider choice of aromatic rice varieties and push demand, industry players said. "With more varieties available on the basmati front itself, the lower-end segment would probably move to these varieties," said Danish Beg, assistant financial controller at exporter REI Agro Ltd.

"A transition will happen from non-basmati to basmati." The non-traditional varieties will attract new buyers as they will be priced lower. The move is also likely to affect Pakistani exports, a large part of which are of the non-traditional variety, industry players said. "This gives India strength. We will be able to get into Pakistan's share," said Kohinoor's Arora.
Exporters expect such a move to provide higher revenue. For REI Agro, it could mean exports in 2007/08 forming a larger share of its sales, at 25 percent, from 18 percent last year, Beg said. Kohinoor, too, hopes to grow its branded basmati exports 20-22 per cent over last year's 1.1 billion rupees.

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Global automakers jostle for place in India's hot auto market

FRANKFURT, Germany: Global automakers on the hunt for new and lucrative markets are jostling for a place in India, where the car market is growing at an average of 20 percent a year, outpacing even China.

Getting a foothold in the giant country and economic powerhouse can be a tricky affair — the key to success lies in keeping the price ticket low, squeezing margins. Still, that is not deterring automakers like Renault, Hyundai and others from trying.

"Not being in India would be a huge strategic mistake," Nissan Motor Co. Executive Vice President Carlos Tavares told The Associated Press on the sidelines of the Frankfurt auto show. "It's an investment for the future."

Indian car sales totaled 1.1 million in the year ended in March, with compact hatchbacks accounting for nearly three-quarters of that. Though that number pales in comparison to China, the market is growing much faster.

India's demanding, frugal consumers want inexpensive and fuel-efficient cars, durable enough to withstand potholed roads and roomy enough to fit a family of five or six. Plus, of course, an arctic-level air conditioner.

Nissan has lagged behind its Japanese rivals in tapping opportunities in India, both as a market and as a manufacturing base.

Leading Japanese automakers, including Toyota Motor Corp., Honda Motor Co. and Suzuki Motor Corp., have significantly expanded their operations in India in recent years.

Nissan made its first move to enter India this year, signing up for a passenger car venture with its partner, Renault SA of France and Indian automaker Mahindra & Mahindra Ltd.

The three are building a large plant near the southern Indian city of Chennai, which Nissan would use to manufacture and export compact cars to Europe.

Renault CEO Carlos Ghosn said Tuesday that construction at the plant isn't likely to start before 2008, with production expected to begin in 2010.

Spurred by Tata's ambitions for a super-cheap car, Nissan and Renault also are exploring the viability of a sub-US$3,000 (€2,175) vehicle.

Renault is talking with Indian automaker Bajaj Auto Ltd. about a possible alliance to manufacture such ultra-cheap cars. Bajaj Auto, based in the western Indian city of Pune, is one of India's leading manufacturers of motorcycles and motorized rickshaws, but has no experience making cars.

Given import taxes that exceed 100 percent, carmakers looking to break into the Indian market need to think about producing locally.

India has a competitive advantage over China, as the Indian government allows carmakers to establish 100 percent owned local subsidiaries, an option chosen by companies like General Motors Corp., Hyundai Motor Co. and Ford Motor Co. In China, local partners are mandatory.

South Korea's Hyundai developed the Santro for the Indian market, designing extra head room for turbaned passengers and paying more attention to the back seat, where the owners of Indian cars often sit, Hyundai spokesman Thomas Rauh told The Associated Press,

Hyundai's Indian unit has shifted its entire production of the Santro, known outside India as the Atos Prime, to the southern Indian town of Sriperumbudur, just outside the port of Chennai.

A third of the cars produced at this plant are exported to 68 countries, from neighboring Sri Lanka to faraway Mexico. By October, Hyundai will complete a second factory nearby, doubling annual production to 600,000 cars — most of them compact hatchbacks that sell for about US$7,000 (€5,080).

Rauh said car makers once questioned whether Indians were interested in making quality cars, long considered a luxury in this once-socialist style economy. Now, Hyundai is focusing on making cars for affluent Indians and for export, leaving others to fight for the lower end of the market.

"It's a dogfight down there," he said. "It would not help us to go downmarket."

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US unlikely to withdraw WTO wine case soon

Unlike the EU, the US does not seem to be in a hurry to drop its case against India’s alleged high import duties on wines and spirits at the World Trade Organization (WTO).Although, India brought down import duties on foreign liquor in July this year to levels committed at the WTO, US officials say that the case would be dropped only after the country is satisfied that the local levies that state governments are planning to impose on imported liquor are not discriminatory. India, in the meanwhile, is planning to approach the WTO dispute settlement body with a written submission justifying the measures which the US has complained against.

Speaking to ET, sources from the commerce ministry said that there was no reason for the US to continue with its case against India at the WTO. “The EU and the US had a point when they complained that India’s import levies on liquor is higher than what the country’s commitment is at the WTO. That is why, after much deliberation, India removed all additional customs duties on wines and spirits. There is no reason why the US should continue with the case now,” an official said.

India removed additional Customs duties on wines and spirits in July following disputes filed by the EU and the US against the high duties at the WTO. The EU and the US had claimed that although India had bound its duties on wines and spirits at the WTO at 150%, the aggregate duties were much higher ranging from 177.33% to 264% for wines and from 252.22% to 550% for spirits.

The US, however, seems to be in a mood to wait and watch how things unfold. A US government official, who did not want to be named, told ET that the country had some apprehensions about the local taxes which the state governments were planning to impose on imported liquor.

So far, the local levies imposed by states on foreign liquor was just a fraction of the levies imposed on domestic liquor. However, now that the Centre has removed the ACD, the states have plans of imposing local levies on imported wines and spirits at par with domestic liquor.

Justifying the move, Indian officials say that as long as the state levies on imported and domestic liquor are the same, the criteria of national treatment was being maintained and there was nothing the exporting countries could complain against. US officials, on the other hand, maintain that they would first like to be sure that there is no discrimination against foreign liquor before taking back the case.

India now plans to send a written submission to the WTO, pointing out that the case filed by the US against India was not justified any more. The country is hoping that the WTO would convince the US to drop its case.

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India not reckless in CECA talks with ASEAN

NEW DELHI: New Delhi appears to have now responded to the ASEAN’s indifference to its perceived alacrity to conclude the Comprehensive Economic Cooperation Agreement (CECA) talks, commerce minister Kamal Nath stayed away, despite being an invitee, from the ASEAN+three economic ministers’ annual meeting held at Makati City, the Philippines, on August 26, even as Chinese, Korean and Japanese ministers participated to further their trade talks with the union.

Commerce ministry officials here say with Malaysia and Indonesia, two most influential ASEAN members, remaining firm in their opposition to India’s special list of five products for which it wants less rigorous tariff cuts, even the initial agreement of trade in goods was unlikely to be signed at the ASEAN-plus-one summit in Singapore this November.

“To be optimistic, there could be a joint statement at the summit that the talks have been concluded,” said an official. When asked how this statement would be different from the joint pronouncement earlier this year that talks would be concluded by July, he said, rather evasively, that this (the likely November statement) would be clearer, “the two sides would say the negotiations are through, the texts are ready...”

The possibility of even such joint statement, according to the official, however, hinges on both sides “showing a lot of intention to quickly wrap up things.” Of course, even if the heads of governments affirm their resolve, it would take at least a couple of months more for the governments to draft the agreement and get domestic approvals.

The differences are now over the extent of tariff cuts the agreement would mandate on palm oil (crude and refined), coffee, tea and pepper. India wants to treat these products as “special”, considering the domestic sensitivities. India’s plantation lobbies and their political patrons indeed wouldn’t tolerate tariffs on these items to fall sharply.

So what about the negative lists (for items that are to be wholly outside the free trade pact) which have so far kept the two sides not seeing each other eye to eye? Sources say the two have now more or less patched up on this front, thanks to India’s climbing down. Both sides would maintain negative lists of 490 items (for each ASEAN member, there would be separate lists of the same strength).

To be specific, ASEAN wants Customs duty on crude and palm oil to come down to 20-25% at least while New Delhi would not budge: it is firm on 50% (crude) and 60% (refined). Similarly, ASEAN says duty on coffee and tea should be pared to 20% from 100% now and that on pepper from 70% to 20% while, again, India asserts the duty can’t be cut to less than 50% in these cases.

In addition, when it comes to negotiating trade in services and investment liberalisation, the Indian interlocutors have become considerably more demanding. “We want Asean to be more accommodative in the financial sector, permission for our banks to establish/expand their presence by opening of branches, etc,” said the commerce ministry official.

India wants its medical, engineering, computer and para-medical professionals to benefit from the liberalisation while ASEAN’s interest is to get opening in India for their convention and exhibition firms and other contractors.

New Delhi has flagged the idea of the agreement on trade in goods immediately following the comprehensive pact covering services and investment. “The agreement in services should happen in a maximum of a few months after the pact on goods,” said the official.

The Indian policymakers reckon that in services, the country’s comparative advantage is rather widespread, from health and tourism to law and accounting. Attracting large amounts of foreign investments is considered to be vital for accelerating the now-handsome growth in manufacturing. So free trade in goods is not India’s priority while entering into bilateral agreements and this policy shift has apparently made India less obsequious in the talks with the ASEAN. It is not desperate for a deal.

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Govt to provide legal assistance to sea food exporters

NEW DELHI: The government on Wednesday said it would provide legal assistance to sea food exporters who have filed a suit with the WTO against dumping duties in the US on their exports.

"The matter has been referred to the Dispute Settlement Body of the WTO. Government has also approved engaging an advocate for this purpose," Minister of State for Commerce Jairam Ramesh said in a written reply to Rajya Sabha.

The Sea Food Exporters Association of India has filed suits against anti-dumping order of the US government and enhanced customs bond.

Additional customs bonds were imposed on Indian shrimp imports into the US Exporters from six countries - India, Thailand, Vietnam, China, Ecuador and Brazil - have to execute customs bonds over and above the anti-dumping/countervailing duty to the Customs and Border Protection (CBP) of the US for their shrimp export operations.

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Russia to sign draft rules today on Indian sesame seeds import

Kolkata, Sept. 6 The Export Inspection Council of India (EIC), set up primarily to facilitate development of exports through quality control and pre-shipment inspection, is learnt to have been nominated as the agency from the Indian side for signing the draft protocol with Russia for export of sesame seeds.

Sources said the Russian authorities have been urged to lift the restriction on import of sesame seeds from India, once the protocol is signed.

A team from Russia is also expected to visit India during the first week of October 2007 to inspect the laboratories and testing facilities.

The signing of the protocol, aimed at boosting co-operation between the Federal Service for Veterinary and Phytosanitary Surveillance (FSVPS), Russian Ministry of Agriculture and India, is expected to take place on Friday in Moscow.

It is learnt that detailed discussions will be held between the Indian delegation and Russian authorities to ensure quality and safety of sesame seeds exports.

The modalities for lifting the restriction may also figure in the talks.

Import of sesame seeds from India by Russia was restricted some months ago by Russian authorities, who claimed to have detected aflatoxin B1 contamination.

Trade sources said the Indian Embassy had pointed out that as per the contract, the Indian supplier was not asked for any test for aflatoxin B1 and that a copy of the certificate issued by SGS Vostok stating that no aflatoxin B1 was found was enclosed.

According to the Russian authorities, both aflatoxin B1and metallomagnetic admixture were detected.

The Indian side had said utmost care was being taken to ensure quality.

The sources also said that the Indian side has handed over a list of laboratories equipped with the required testing facilities and accredited by the National Accreditation Board for Laboratories (NABL).

It is learnt that in order to ensure safety of sesame seeds, each consignment would be accompanied with a quality certificate issued by a laboratory recognised by India.

The two sides are expected to discuss the detailed format of this certificate at a later stage.

According to the sources, the Indian side has proposed that quality certification by Vimta Specialities and Vimta Labs Ltd be accepted.

The companies had earlier been accredited by Russia in respect of export of sesame seeds.

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China may reduce iron ore imports from India

DALIAN (China): China's iron ore imports, including that from India, are expected to be sluggish this year due to rising domestic supply and decline in the growth of Chinese steel output capacity, industry insiders say.

The country's import of iron ore rose to 187.9 million tonnes in the first six months this year, up 16.46 per cent year-on-year.

Australia continues to be the biggest exporter to China, accounting for 37.95 per cent of the country's total imports, followed by India, Brazil and South Africa.

The output of large and medium-sized mines in China rose 29.28 per cent to 321.28 million tonnes in the first half while the output of small mines was around 50 million tonnes.

"The large scale of mining by domestic steel companies is expected to curb further rises in ore prices," China Daily quoted Mr Chen Xianwen, an official from the China Iron & Steel Association (CISA), as saying at the International Iron Ore Market Semina r in Shanghai yesterday.

"The domestic demand for iron ore is expected to increase around 70 million tonnes this year. Apart from the domestic output growth, of around 40 to 45 million tonnes, we need only 30 million tonnes more from overseas, which rose only nine per cent from last year," said Mr Zou Jian, chairman of the China Metallurgical Mining Enterprise Association, at the seminar.

China is the world's largest steel producer and biggest importer of iron ore. Iron ore is India's No.1 item in the export basket. "Large drops are expected in steel prices in 2009 because of the projected slowdown of world economic growth," Mr Chen said . - PTI

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Pak mills get stay against Indian sugar imports

New Delhi, Sept. 5 The saga involving detention of Indian sugar by Pakistani customs authorities on health grounds is getting more curious by the day.
Public health!

The Pakistan Sugar Mills Association (PSMA) has managed to obtain an interim injunction from a district court in Lahore against import of sugar from India on grounds that “it will cause harm to the health and safety (of) the public.”

But what is interesting is the evidence based on which the district civil judge concerned has issued the order, dated August 30. The order has cited an analytical test report of the Pakistan Council of Scientific & Industrial Research (PCSIR) in respect of a sample of “Indian sugar”, dating back to July 30, 1996.

The report had found the sulphur di-oxide (SO2) content in the said “Indian sugar” at 30 mg/kg, which was below the then European Economic Community (EEC) standard of 15 mg/kg. Further, the sample had an ICUMSA of 131, against the EEC standard of 50 (ICUMSA is a measure of whiteness; the higher the number, the lower the whiteness).
‘Bizarre’ evidence

“This is completely bizarre. First of all, how do you conclude that the product being exported now is sub-standard based on the test result for a sample of so-called Indian sugar of July 1996. The right procedure would be to t ake a sample of the present consignment and get it tested at the PCSIR or other accredited laboratory,” an industry source noted.

Secondly, the EEC standards pertain to refined sugar and not the plantation white sugar that is widely consumed in both in India and Pakistan. “Do the Pakistani authorities mandate the EEC standards for their own sugar? If they do not, then how can they claim that our sugar is hazardous for public health and safety?” the sources wondered.

Moreover, the Indian Sugar Exim Corporation had only last year exported four lakh tonnes (lt) of sugar through tenders floated by the Trading Corporation of Pakistan. “In their tenders, they asked for 100 ICUMSA and not 50 ICUMSA as per EEC standards. We accordingly supplied them 100 ICUMSA sugar. The tenders also mentioned an SO2 limit of 60 mg/kg, whereas we delivered at 25-35 mg/kg. If nothing short of EEC standard is acceptable, the four lt of our sugar consumed by them last year should have caused a health emergency there”, the sources added.

The Pakistani land customs had, late last month, detained the first rail rake consignment of 2,400 tonnes entering through the Wagah border. The sugar, from the Saraswati Sugar Mills at Yamunanagar (Haryana), was imported by Rana Brothers, a Lahore-based firm, which has now been restrained from marketing the consignment.
Stuck at Attari

A second rake, sourced by Swera Traders from the Seksaria Biswan factory at Sitapur (Uttar Pradesh), is stuck at the Attari check post of the Indian side for the last one week. In this case, the Pakistani rail authorities have not even facilitated interchange of the rake, because of other rakes, mainly carrying soyameal, have also been held up.

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HC quashes DGFT order

The Bombay High Court has quashed an order of the Director General of Foreign Trade (DGFT) that rejected a plea from a skimmed milk powder (SMP) exporter to fulfil its commitments to buyers abroad after the Centre imposed a ban on milk and SMP exports on February 9.

In its order, a bench comprising Mr Justice Swatanter Kumar and Mr Justice S.C. Dharmadhikari, asked the DGFT to hear the exporting firm Parag Milk and Milk Products again and allow the exports within three weeks. The Court was disposing of a writ filed by Parag Milk challenging the ban after the DGFT had rejected its plea on an earlier order asking it to consider the firm’s request.

Stating that the DGFT’s order was not in conformity with settled canons of law, the bench said the ban order was not retrospective and, therefore, the firm’s request should not have been turned down.

According to Parag Milk and Milk Products, it had open three irrevocable letters of credit for export of SMP to buyers in Thailand, France on January 24 and 31 this year. It had agreed to supply 1,000 tonnes of SMP each to these buyers every month until May 2007 and February 2008, respectively. Besides, the company said it had expanded its SMP business and it made up 12 per cent of its total exports.

When the company initially moved the Court, the Centre on March 16 was asked to hear the petitioner and pass an order. But the Commerce Ministry failed to pass any order and the court was approached again. This time, too, the court asked the Centre to examine the issue expeditiously following which the DGFT passed the order barring export.

(The ban on milk and SMP exports runs till September 30 but the Centre has eased it after milk prices stabilised.)

The bench said when the letters of intent were issued in favour of Parag Milk, there was no ban in force. Therefore, the petitioner had the right to export SMP. Stating that the expression “export obligation” as defined in the Foreign Trade Policy had to be given a cogent meaning, it said unnecessary restricted meaning should not be attached to it.

Also, the Union Cabinet Committee, while deciding to go for the ban on February 1, had given power to the authorities to examine case-by-case and permit discharge of existing export obligation.

“The authorities concerned in their wisdom retained unto themselves power to permit such export. This, it was not the intent of the authority to operate the absolute ban even in relation to the existing liability,” it said.

Stating that the Government has powers to decide policies and take action, it said these, however, were expected to be in conformity with law and not arbitrary or ultra vires.

The court said the DGFT had refused export permission, despite Parag Milk offering to restrict its shipments to 5,000 tonnes. It, however, did not make any comment on the ban order as the petitioner in his initial writ did not challenge it.

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Curbing DEPB misuse: Export valuation rules soon

New Delhi, Sept. 5 The Finance Ministry plans to soon come up with export valuation rules to ensure that there is no misuse of existing duty entitlement passbook (DEPB) or drawback schemes and also to curb money laundering through merchandise export activities.

Official sources said that the rule making process was at the last and final stage and they would soon be notified. The Central Board of Excise and Customs (CBEC) had in March this year come up with draft export valuation rules.

The exporting community had, however, opposed the introduction of such rules.
No EXISTING law Currently, the country does not have any specific export valuation rules under customs legislation. The Union Finance Minister, Mr P. Chidambaram, had in Budget 2007-08 announced that “transaction value” and “not deemed value” would be the basis for valuation of exports. The transaction value is to be determined in accordance with the rules to be framed in this regard.

India’s merchandise trade touched $125 billion in 2006-07. For 2007-08, the merchandise export target has been pegged at $160 billion.

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