New Delhi will ask Brussels to reconsider the decision by the European Commission (EC) to end a preferential tariff system for imports from India and other developing nations. Should the current regime of low customs duties end, it would make Indian goods more expensive with exporters paying anywhere between 6% and 12%. “We have a month’s time before the new GSP (generalised system of preferences) regime to convince the EU,” an official familiar with the development told FE.
The EU has decided to “graduate” exports of several items including textiles, chemicals, minerals, leather goods and motor vehicles from India out of its GSP scheme with effect from January. Preferential or nil customs duty to exports from developing nations under GSP is an exception to the World Trade Organisation obligation of member states to give every other member equal and non-discriminatory treatment under the ‘Most Favoured Nation’ status. Other products to be excluded from the preferential import tariff include bicycles, aircraft, spacecraft, ships and boats. India’s exports to the European Union, which accounted for 17% of the country’s total exports, shrank by over 4% in 2012-13 to $50 billion.
According to official sources, India’s commerce ministry will also protest the EU’s move to simultaneously grant zero customs duty on textile imports from Pakistan from January. This, according to New Delhi, will affect the regional competitiveness of India’s textile industry, its second largest employment creator after agriculture.
“We will take it up with Brussels because for textiles, it is a double whammy. The EU has removed Indian textiles exports from GSP, which means higher duty at EU borders, and they are in the process of giving textile exports from Pakistan GSP Plus status, which means zero duty,” an official confirmed to a news agency.
The move gives clothing, apparel and accessories exports from Pakistan a 10% duty advantage over those from India. The official explained that the EU Parliamentary Committee’s vote on November 5 to give GSP Plus status to textiles from Pakistan will have to be ratified by the European Parliament, which it is expected to do in early December. The EC’s decision to graduate the Indian textile industry out of GSP from January 1 already has the approval of the European Parliament.
The EU’s move to deny India the GSP benefit for certain goods is part of its plan to redesign the scheme. The idea is to exclude advanced developing economies that have integrated into the world trade and to focus on the needs of those that are lagging. Textile exports from India are being phased out of GSP as they exceed 14.5% in value of textile imports into the EU from all beneficiary countries, going by a three-year average up to 2012. For other products the threshold for exclusion is 14.5% as per the EU regulation.
The European parliamentary committee’s vote to grant for GSP Plus status to textile imports from Pakistan and nine other countries is aimed at promoting international conventions on core human and labour rights, environment and good governance. According to overseas reports, a GSP Plus tag for Pakistan would help it create a million new jobs, boost its exports to EU by $500 million and facilitate capital flow to the sector because of the competitive edge from tariff removal.
Ajay Sahai, director general and CEO, Federation of Indian Export Organisations, said the EC’s decision would affect the competitiveness of the country’s exports. “Even though the EC has suspended this preference for both India and China, we would be hit more since China is more competitive," Sahai said.
Indian officials are also worried about the prospect of a decline in forex inflows in a year in which they had to take harsh steps like curbing gold imports to contain the current account deficit to below $70 billion or 3.8% of GDP. "It is important for affected industries to prepare themselves for the change. The cost of specified Indian exports to the EU shall, as a result of the proposed changes, increase and accordingly will impact their competitiveness," said Saloni Roy, senior director, Deloitte in India.
"The US has already given many advantages to Pakistan due to various political reasons and with this suspension from the EU, we might see a shortfall of 2-5% in exports," said Vishwanath, joint managing director of Nath Brothers Exim International, a Noida-based firm exporting garments.
To get broader preferential access to the EU market, India is now negotiating a free trade pact with the EU, which already has such arrangements with about 34 other countries. Talks on the proposed India-EU pact are progressing slowly due to a lack of agreement on areas of market access and its extent.
Sunday, December 1, 2013
Hike in EU customs duty to hit Indian exports
Major east coast ports witness dip in exports
VISAKHAPATNAM: In what should be a major wake up call for the government, four of the six major ports on the East Coast have witnessed a drop in export cargo over the last two financial years. Visakhapatnam Port, which exported 14.2 million tonnes of cargo in 2010-11, exported only 11.2 million tonnes in 2012-13, a drop of three million tonnes, according to data issued by the Union shipping ministry.
Chennai Port, which had topped the exports chart two years ago among the six major East Coast ports, witnessed a fall of little more than two million tonnes, while the drop in exports at Paradip Port was close to a staggering 13 million tonnes in the same period. Kolkata Port, which comprises the Kolkata Dock System and Haldia Dock Complex, also witnessed an overall drop in exports.
The VO Chidambaram Port, which was earlier known as the Tuticorin Port, saw export cargo rise by nearly 1.4 million tonnes between 2010-11 and 2011-12 but this subsequently dropped by almost 0.4 million tonnes in 2012-13.The main reason for the decline in exports from the major ports is the restrictions on iron ore mining, which has added to the burden caused by the global economic slowdown. "The economic recession is the main cause of decline in exports at the major ports. This is likely to continue this year also," said Confederation of Indian Industry, Vizag zone, chairman G Sambasiva Rao."Restrictions in iron ore mining and the economic slowdown are largely causing a decline in exports. At the same time, private ports near the major ports are snatching away the bulk of the export cargo.
To counter this, the central government should remove the Tariff Authority of Major Ports (TAMP) to provide a level playing field for major and minor ports," Water Transport Workers' Federation of India general secretary T Narendra Rao told TOI."The major ports had a traffic share of about 64% in 2010-11. This has now decreased to almost 58%. On the other hand, the share of non-major ports has gone up from 35.58% in 2010-11 to 41.54% in 2012-13," said Rao, citing a report by the Indian Ports Association (IPA) published in September 2013.
Rao also alleged that the "government is not serious about protecting major ports which do not have modern equipment and face delays in dredging projects". Visakhapatnam Port has Gangavaram Port and Kakinada Port in its neighbourhood, Chennai Port has Katupalli Port and MARG Karaikal Port, port sources pointed out. Paradip faces competition from Dhamra and Gopalpur, whereas Kolkata needs continuous dredging operations. "Iron ore used to account for a chunk of exports but this has now almost stopped because the government has slapped a 30% export duty and mining has been banned.
Besides, dredging is a major problem that should have been addressed several years ago, especially in Vizag. As a result of the continuous delays, customers prefer going to private ports that have berths ready to discharge the cargo instead of facing problems at a major port," an industry source pointed out.