India WT/TPR/S/100
Page 25
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) INTRODUCTION
1. Since the early 1990s, India has moved gradually away from a strategy of industrialization
through import-substitution and public sector production to a more open, market-oriented trade and
investment regime.  Nevertheless, policies continue to shield domestic producers from foreign
competition, thus affecting an efficient allocation of resources.  Moreover, having made selling in thelarge domestic market more lucrative than exporting, such policies have imparted an anti-export bias
to India's trade regime, thereby hampering the econom y's ability to generate growth through exports.
The use of a wide array of trade policy measures to protect domestic producers from foreign
competition, regulate domestic production and, at the same time, promote exports, renders the import
and export regime unduly complex.
2. The customs tariff has become India's main instrument of trade policy, with the removal of
some 1,400 quantitative restrictions.  While it has been declining, the average MFN tariff is still over
32%.  The authorities have announced their intention to reduce tariffs towards ASEAN levels:
achievement of this goal is likely to depend critically on increased reliance on internal taxes.  Tariff
dispersion also remains high.  Although the proportion of tariff lines that are bound has risen from67% to 72.4% since the previous Review of India, the average bound rate considerably exceeds the
average applied rate, thus imparting a degree of uncertainty to the tariff and providing scope for the
authorities to raise applied MFN rates;  indeed, tariffs were raised on some items following the recent
removal of quantitative restrictions.  With its numerous exemptions, the tariff is also a complex and
thus opaque instrument, which has led to administration problems.  Additional and special additional
duties, which are largely aimed at offsetting the pro-import bias of internal taxes,  contribute further to
the complexity of import regime.  Anti-dumping measures have become an important element inIndia's trade policy;  some 250 actions have been initiated since 1995.
3. The export regime is complex.  In addition to tariff exemptions and duty drawbacks, it
encompasses schemes such as export-processing zones and special-economic zones.  These measures,
which are applied in a compound manner, have been put in place partly to mitigate the adverse impact
of import restrictions on exporters' competitiveness.  Measures are also in place to restrict or prohibitexports, although, according to a recent statement by the Government, these restrictions will be
reduced.
4. Other forms of government intervention also c ontinue to be important.  The state retains
ownership of a number of enterprises, and regulate s the entry (through industrial licensing) of private
companies into some activities, as well as their exit.  State-owned enterprises continue to play a majorrole in the economy.  Despite steps taken to improve it, their perfomance remains weak, thus
constituting a heavy burden on the budgets of central and state governments.  Moreover privatization
(disinvestment) has been slow.  Price controls, ofte n containing a subsidy element, have been retained
for essential commodities, although provisions to phase some of them out are in place.  In addition,
subsidies are widespread;  their scope and cost are difficult to ascertain owing to the lack ofinformation.  The process of privatization and deregulation has highlighted the importance of
competition policy and corporate governance.  To address the limited scope of the present legislation
on competition policy a Competition Bill was introduced in Parliament.  Amendments were made to
the Companies Act and new guidelines were issued to companies in an effort to improve corporate
governance.  Since its previous Review in 1998, India has introduced new legislation on intellectual
property rights.  Enforcement appears to remain weak, despite the authorities efforts to improve it.WT/TPR/S/100 Trade Policy Review
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(2) MEASURES DIRECTLY AFFECTING IMPORTS
(i) Customs procedures
(a) Registration and documentation
5. There have been no major changes in customs procedures since India's previous Review.
Most importers and exporters are required to obtain an Importer Exporter (IEC) number from the
Director General of Foreign Trade (DGFT).1  For imports, three documents are normally required:
the invoice, packing list, and bill of lading or airway bill.  Health certificates, plant certificates, and
phytosanitary certificates are required for certain goods;  import permits, to be obtained from the
relevant Government departments, are also required  for items such as plants, plant materials, and
livestock products.2  Additional documents are required if the goods are being imported (or exported)
under one of the preferential trading agreements, if they are restricted, or under one of the exportincentive schemes.
3
(b) Preshipment inspection
6. India does not require preshipment inspection for imports and does not have a procedure for
clearance of imported goods on the basis of preshipment inspection.  In addition, according to the
authorities, there have been no changes in the position since the last Review, when certificates wererequired for imports of second-hand capital goods and metal scrap.
(ii) Customs valuation and clearance
7. Since its previous Review, the main change in India's legislation on customs valuation is an
amendment to Rule 3 of the Customs Valuation (D etermination of Price of Imported Goods) Rules,
1988, which lays down the method of determination of valuation.
4  Under the Customs Valuation
(Determination of price of imported goods) Rules, 1998, the value of imported goods is based on their
transaction value, which is defined as "the price actually paid, or payable for the goods when sold forexport to India, adjusted for the value of certain costs and services including commissions and
brokerage charges, container and packing costs".
5  If the transaction value of the imported good
cannot be determined, the value of the import may be based on the cost of identical goods sold for
export to India, the transaction value of similar goods, deductive value, and on the residual method.6
Additional changes require:  that the sale be in the ordinary course of trade under fully competitive
conditions;  that it should not involve any abnormal discounts or special discounts limited to exclusive
agents;  and that objective data should exist with regard to "adjustments" made in accordance with the
provisions of Rule 9.
                                                     
1 Foreign Trade (Development and Regulation) Act, 1992, Chapter III;  a list of importers who are
exempt from obtaining an IEC number is given in Ministry of Commerce and Industry (2002).
2 Exports to and imports from India of certain goods are subject to restrictions if imported from or
exported to the United States under U.S. Export Control Regulations (Ministry of Commerce and Industry,2002, Chapter II).
3 The validity of licences under these programmes may vary between 12 and 24 months (Ministry of
Commerce and Industry, 2002, Chapter II).
4 Under the special provisions available for developing country Members under the Tokyo Round
Customs Valuation Agreement, India maintains reservations  under Annex III, paragraphs 3 and 4, relating to the
reversal of the sequential order of Articles 5 and 6 and the application of Article 5.2, whether or not the importerso requests, respectively (WTO document G/VAL/M/7, 17 June 1998).
5 Rule 9 of the Customs Valuation (Determination of price of imported goods), Rules, 1998.
6 Rules 5-8 of the Customs Valuation (Determination of price of imported goods) Rules, 1998.India WT/TPR/S/100
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8. India's legislation was examined by the WTO Committee on Customs Valuation.  Some
Members raised questions regarding India's use of a specified percentage of the f.o.b. value of imports
in cases where it was not possible to determine the cost of, inter alia,  transport, loading, and
unloading charges.7  Following a discussion by Members, it was decided to pursue the matter on a
bilateral basis.8
9. To speed up customs clearance procedures, the electronic data interchange (EDI) system has
been introduced at almost all major ports and air ca rgo complexes.  Under the EDI, the importer is not
required to submit any documentation to customs in advance;  these documents, however, must be
submitted to customs at the time of examination of the goods.  According to a recent advisory report
to the Planning Commission, the introduction of computerization in customs administration under the
EDI system is progressing well.  However, the report states that delays in customs procedurescontinue to be reported by industry despite a fast-track clearance system.  The delays are also due to
the complexity of the tariff and exemptions, which may vary according to product, user, or specific
export-promotion programme.  These delays could be reduced by introducing selective physical
examination of customs of targeted goods on the basis of intelligence.  This would require devoting
more resources to the collection of information (intelligence gathering) so that customs could targettheir inspection at specific products.
9  The authorities state that a number of additional steps have been
taken to reduce clearance times.  These include:  increasing working hours for customs officers at the
air cargo complexes;  revising examination procedures whereby only a small percentage of cargo
would be examined;  allowing imports through couriers, which does not require the presence of the
importer or exporter at the time of clearance;  and filing customs declarations electronically.  Efforts
have also been made to hasten the process of moving cargo from and to ports.  It appears that
23 customs complexes, which account for some 75% of all international trade, are currentlyautomated.  The authorities also state that approximately 80% of daily air cargo shipments are
assessed on the same day by customs (subject to the condition that all the required documentation is
complete).
10. Appeals against any decisions taken by the customs authorities may be examined by the
Commissioner (Appeals) within three months of communication from Customs regarding valuation
and procedures;  judicial appeals may be made, also within three months of communication from
Customs, to the Customs, Excise and Gold (Control) Appellate Tribunal.  According to the
authorities, however, due to logistical problems including a shortage of staff and infrastructural
support, and given that the tribunal receives appeals on matters other than valuation and classification,
it would be difficult for the Commissioner (Appeals) to decide all appeals within the three-monthperiod.  The number of appeals made to the Appellate Tribunal for customs matters fell from 16,700
to 12,600 between 1998 and December 2000;  decisions taken on appeals for this period fell from
16,189 to 15,353.  In 2000, 23 appeals were made to the Commissioner (Appeals).
(iii) Tariffs
(a) Introduction
11. The Indian customs tariff is a major source of revenue for the Central Government,
accounting for almost 30% of net tax revenue (22% of gross tax revenue) in 2001/02 compared with
46% of net tax revenue (33% of gross tax revenue) in 1996/97.
10  The applied MFN tariff continues to
                                                     
7 WTO documents G/VAL/M/3, 24 June 1996, G/VAL/M/5, 3 June 1997, and G/VAL/M/7,
17 June 1998.
8 WTO document G/VAL/M/7, 17 June 1998.
9 Planning Commission (2001b).
10 Calculated from Table III.13 (Customs as a percentage of the centre's net tax revenue).WT/TPR/S/100 Trade Policy Review
Page 28
provide a high level of protection for Indian industry, although average rates have declined from 35%
to 32.3%, since the last Review of India;  the average rate is expected to decline further to 29%, if
current budgetary proposals are approved by Parliament.  With its numerous exemptions, the tariff is
also a complex and consequently opaque instrument, which leads to administrative problems.11
(b) Bound tariffs12
12. Since its previous Review, India has submitted rectifications and modifications of its schedule
under Article XXVIII:1 of the GATT, 1994.  As a result, the number of lines that are bound has
increased, from 67%, to 72.4% in 2001.  Bindings have been undertaken for previously unbound
products, such as textiles and clothing, while India renegotiated some commitments on previously
bound items, relating mainly to agriculture.  India bound 100% of all agricultural lines (under the
WTO definition of agriculture) and 68.2% of lines for non-agricultural products.13  Bindings were not
made in several chapters including fish and crust acean products (HS 3) in agriculture;  and leather
products (HS 42), footwear (HS 64), headgear (HS 65), and base metals (HS 83) in manufacturing
(Chart III.1).  In general, India bound its tariff at ceiling rates ranging from 40% for non-agricultural
products to 100% for most agricultural products and 300% for edible oils.
13. As a result of India's commitments, the final average bound tariff is expected to be 50.6% in
2005, with an average of 115.7% in agriculture (HS 1-24) and 37.7% in non-agricultural products
(Table III.1).14  These averages do not include lines where different parts of the HS six-digit line were
bound at different rates.  Most of these excluded tariff lines are found in textiles and clothing and are
discussed in greater detail in Chapter IV(3).  The average bound tariff is considerably higher than the
current MFN average tariff, which is 32.3%, and especially in agriculture where the current average
applied rate is 41.7%.15  This difference lends uncertainty to economic agents in India as it provides
the Government with considerable scope to raise applied MFN tariffs within these bindings;  duringthe period under review, however, there have not been many instances (except in agriculture) where
applied tariffs have been increased.
14. The rectifications and modifications of India's Schedule have resulted in an increase in a
number of tariffs;  however, they are not yet certified because of reservations raised.  India has,
nevertheless, pursuant to Article 28(3) of the GATT 1947, applied these higher rates.  As a result,although most final bound tariffs are considerably higher than their corresponding current MFN rates,
MFN rates on a few tariff lines appear to be higher than the final bound rate.  The products concerned
include milk and cream products, wheat and meslin, alcoholic products, and some fabrics.
15. India notified the Committee on Market Access that it reserved its rights under
Article XXVIII:5 of GATT 1994 to modify its Sche dule XII during the three-year period commencing
1 January 2000.
16
                                                     
11 Planning Commission (2001b).
12 Based on India's Schedule XII as of March 2002.
13 In addition, around 1% (43 lines at the HS six-digit level) of non-agricultural lines were partially
bound (a part of the six-digit line was bound).
14 The overall average bound tariff for 2005 in the last TPR of India was estimated at 54%.  The
difference between this figure and the current average of 50.6% may be due to the change of nomenclature
(from HS92 to HS96) and the bindings made in additional lines.
15 As India's Schedule of commitments in the HS96 nomenclature does not have a base rate, it is not
possible to calculate the current bound tariff for agriculture as no phase-out is indicated in the Schedule.  Thebound rates referred to in this report therefore refer to final bindings in 2005.
16 WTO document G/MA/73, 21 October 1999.India WT/TPR/S/100
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020406080100
25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 78 80 82 84 86 88 90 92 94 96Per cent
HS Chapter
HS         Description
Chapter  
25          Salt; sulphur; earths and stone, etc.
26          Ores, slag and ash
27          Mineral fuels, mineral oils, etc.
28          Inorganic chemicals; org. or  inorg.
              compounds of precious metals, etc.
29          Organic chemicals
30          Pharmaceutical products
31          Fertilizers    
32          Tanning or dyeing extracts etc. 
33          Essential oils & resinoids;
              perfumery, cosmetic/toilet prep.
34          Soap, organic surface-active 
              agents washing prep., etc.    
35          Albuminoidal substances;
              modified starches; glues, etc.
36          Explosives; pyrotechnic products;
              matches, etc
37          Photographic or cinematographic 
             goods
38          Miscellaneous chemical products
39          Plastics and articles thereof
40          Rubber and articles thereof
41          Raw hides and skins and leather
42          Articles of leather, etc.
43          Furskins and artificial fur; 
              manufactures thereof
44          Wood and articles of wood, etc.
45          Cork and articles of cork
46          Manuf. of straw, of esparto, etc.   
47          Pulp of wood or of other 
              fibrous cellulosic materialHS        Description
Chapter
48          Paper and paper board, etc.
49          Printed books, newspapers, etc.
50          Silk
51          Wool; fine/coarse animal hair, etc.
52          Cotton
53          Other vegetable textile fibres 
54          Man-made filaments   
55          Man-made staple fibres 
56          Wadding, felt and non-wovens;
              special yarns; twine, cordage, etc.
57          Carpets; other textile floor
              coverings
58          Special woven fabrics; lace, etc.
59          Impregnated, coated, covered or
              laminated textile fabrics, etc.
60          Knitted or crocheted fabrics    
61          Articles of apparel and clothing
              accessories, knitted or crocheted
62          Articles of apparel and clothing
              accessories, not knitted, etc.
63         Other made-up textile articles;
              sets, worn clothing, etc.
64          Footwear, gaiters, etc.
65          Headgear and parts thereof
66          Umbrellas, walking-sticks, etc. 
67          Prepared feathers and down, etc.
68          Articles of stone, plaster, etc.
69          Ceramic products
70          Glass and glassware
71          Natural or cultured pearls, precious/
              semi-prec. stones, prec. metals, etc.HS         Description
Chapter
72          Iron and steel
73          Articles of iron and steel
74          Copper and articles thereof
75          Nickel and articles thereof
76          Aluminium etc. 
78          Lead and articles thereof   
79          Zinc and articles thereof 
80          Tin and articles thereof
81          Other base metals, etc.
82          Tools, implements, cutler
              spoons and forks, etc.
83          Misc. articles of base metals
84          Nuclear reactors, boilers,
              machinery, etc.
85          Electrical machinery and
              equipment, etc.
86          Railway or tramway 
              locomotives, etc.
87          Vehicles other than railway
              or tramway rolling-stock; etc.
88          Aircraft, spacecraft, etc.
89          Ships, boats, etc.
90          Optical, photographic, etc. 
              apparatus
91          Clocks and watches, etc.
92          Musical instruments, etc.
93          Arms and ammunition, etc.
94          Furniture, bedding, etc.
95          Toy, games, etc.
96          Miscellaneous manuf. articles
97          Works of art, antiques, etc.Chart III.1
Share of bound tariff lines in manufactured products by HS chapter, 2001/02 
26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 79 81 83 85 87 89 91 93 95 97
Source :  WTO Secretariat calculations, based on data provided by the Indian authorities.Fully bound Partiall y boundWT/TPR/S/100 Trade Policy Review
Page 30
Table III.1
Structure of tariffs in India
(Per cent)
1997/98 2001/02 U.R.a
1. Bound tariff lines/all tariff linesb66.9 72.4 72.4
2. Duty-free tariff lines/all tariff lines 1.4 1.1 ..
3. Non- ad valorem  rates/all tariff lines 0.2 5.3 ..
4. Tariffs with no ad valorem  equivalent 0.2 5.3 ..
5. Simple average bound tariff ratec.. .. 50.6
Agricultural products (HS01-24) .. .. 115.7
Non-agricultural products (HS25-97) .. .. 37.7
6. Simple average applied tariff rate 35.3 32.3 n.a.
Agricultural products (HS01-24)d33.8 41.7 n.a.
Non-agricultural products (HS25-97) 35.6 30.8 n.a.
7. Domestic tariff "spikes"/all tariff linese0.2 1.3 ..
8. International tariff "spikes"/all tariff linesf96.6 93.9 ..
9. Overall standard deviation 14.5 13.0 ..
10. Coefficient of variationg0.4 0.4 ..
.. Not available.
n.a. Not applicable.
a Based on 2001/02 MFN tariff description.
b Partially bound rates exist in 1997/98, 2001/02 and U.R., representing respectively 0.1%, 0.8% and 0.8% of all tariff lines.
c Tariff lines with two or more different bound rates have been excluded from the calculation.  Such tariff lines are found in
textiles (chapters 51, 52, 53, 54, 55, 58 and 63);  chapter 84 (25 lines);  12, 27 and 85 (four lines each);  30, 33 and 90 (tw o lines
each);  and chapters 2, 4 , 9, 10, 13, 18, 19, 20, 21, 25, 32, 44, 48, 72, 82, 94 (one line each).
d Under the definition used in the WTO Agreement on Agriculture, the simple applied tariff average on agricultural imports is
35.1% and 40.7% in 1997/98 and 2001/02, respectively.
e Domestic tariff "spikes" are defined as those rates exceeding three times the overall simple average MFN rate.f International tariff "spikes" are defined as rates exceeding 15%.
g The coefficient of variation is the standard deviation (indicator 9) divided by the simple average (indicator 6).
Note: Tariff analysis based on standard tariff rates.
Calculations exclude specific duties and include the ad valorem  part of alternate and compound rates.
Source: WTO Secretariat estimates, based on data provided by the authorities of India.
16. In the Information Technology Agreement (ITA ), India has made commitments to remove
tariffs on a number of products including computers, telecommunication equipment, semiconductors
and semiconductor manufacturing equipment, software, and scientific instruments.  Its ITA Schedule
consists of 163 tariff lines at the HS six-digit level.17  India is expected to remove tariffs on all these
products by the end of 2004.18
(c) Applied MFN tariff
17. India's (bound and) applied most-favoured-nati on (MFN) tariff is based on the Harmonized
Commodity Description and Coding System (HS96).19  Since its last Review, India has continued to
                                                     
17 Several of the 163 tariff lines have further subdivisions, resulting in a total of 217 lines at the
six-digit and eight-digit levels.
18 The Minister of Finance had announced in 1998 that India's commitment to remove tariffs on ITA
products by 2004 would be implemented by the end of 2002.  However, in the 2002/03 Budget, he announcedthat local manufacturers would be given an opportunity  to prepare for interna tional competition in these
products by the end of 2004 (Ministry of Finance, 2002b, Part B, paragraph 140).
19 The MFN tariff for 2002/03 is, however, based on the HS 2002 nomenclature.India WT/TPR/S/100
Page 31
rationalize its applied MFN tariff structure.  Despite these efforts, however, the tariff remains complex
and a number of exemptions applied to products, industries, and end-users add to its complexity and
lack of transparency.20  The authorities maintain that, as India is a developing country, tariffs are an
important tool for ensuring efficient resource allocation and economic development.  Thus,
concessions are granted to certain end-users based on social, economic, industrial, and environmental
constraints;  however, these are notified, and related to specific chapters, headings or sub-headings,and "certification procedures" prevent misuse.
18. The MFN tariff is based on "standard" rates of duty, which are statutory tariffs and may only
be changed through legislation.  There are, in addition, numerous tariff exemptions
21, which are
notified administratively from time to time by the Government and ratified subsequently by
Parliament.  While the standard rate is available only at the HS six-digit level, it was not possible toinclude the large number of tariff exemptions that are notified at the HS six-digit, eight-digit or ten-
digit levels;  some may be targeted at specific industries or end-users.  The analysis presented here,
therefore, may overstate applied tariff protection, although it is not possible to determine by what
margin.  On the other hand, in addition to the standard tariff, most imports into India face additional
and special additional rates of duty, which are used, ostensibly, to balance the pro-import bias ofcentral excise and state sales taxes that are applied only to domestically produced goods (section (vii)
below).
19. Import duties are assessed on the c.i.f. value of imports.  In 2001/02, India's MFN (standard)
tariff contained 5,114 lines at the HS six-digit level.  Of these, 94.7% are subject to ad valorem  rates
of duty, while 271 and 2 lines, respectively, are subject to alternate and specific rates of duty.  The
two tariff lines subject to specific rates are almonds (shelled and unshelled), and the 271 lines subject
to alternate rates of duty relate to textiles and clothing products.  Ad valorem  equivalent rates for these
alternate and specific duties were not available to the Secretariat;  as a result, the tariff analysis
includes the ad valorem  rates (4,841 lines) and the ad valorem  component of the alternate rates
(271 lines), a total of 5,112 lines (the 2 specific tariff lines have not been used in the analysis).
22
Tariff average, dispersion, and escalation
20. In 2001/02, India's standard applied MFN tariff averaged 32.3%, slightly lower than the
35.3% average for 1997/98 (also based on the standard rate of tariff) (Table III.2)23;  the decline is in
part due to the removal of the 5% special duty applied to most products, which was introduced in the
1996/97 and 1997/98 budgets and removed in the 1999/00 budget.  In comparison, the average
applied tariff on the basis of duty collected is estimated by the authorities to be considerably lower,
some 21% in 2000/01.24
                                                     
20 The exemptions may be granted to products but also to certain end-users, for example small-scale
firms and firms operating in export-processing zones.
21 In any standard publication of the customs tariff, containing 1,150 pages, it is estimated that
400 pages are devoted to exemptions (Planning Commission, 2001b).
22 The ad valorem  component of these alternate tariff lines is most likely to understate the protection
provided to these products as the degree of protection provided by specific tariffs tends to be higher than ad
valorem  rates.  Insofar as non- ad valorem  duties conceal tariff "spikes", the overall simple average of applied
tariff rates (indicator 6 in Table III.1) together with the indicators of tariff "spikes" and tariff dispersion(indicators 7-10) tend to be underestimated.
23 The average tariff for 1997/98 is based on the standard rate plus the special duty of 5%, which was
removed in 1999/00;  duty exemptions have not been included in the analysis for the 1997/98 or 2000/01 tariff.
24 The tariff averages calculated by the Secretariat involve simple  (non-weighted) arithmetic average of
MFN tariff rates, which take no account of the relative importance of various products.  Among the mainalternatives to simple averages are the collected  tariff rate or averages weighted  by the shares of imports or ofWT/TPR/S/100 Trade Policy Review
Page 32
21. In 2002/03, it is expected that the simple average applied tariff will decline further to 29%,
partly as a result of a decline in the "peak rate" of tariff from 35% to 30%;  this is subject to the
passage of tariff proposals made in the Budget fo r 2002/03.  Moreover, in his 2002/03 budget speech,
the Finance Minister stated that by 2004/05, there would be only two standard rates of tariff, 10%
covering raw materials, intermediates and components, and 20% for final products.25
Table III.2
Summary analysis of Indian's MFN tariff, 1997/98 and 2001/02
MFN 1997/1998 MFN 2001/02
No. of
linesAverage
(%)Range
(%)Coefficient
of variationAverage
(%)Range
(%)Coefficient
of variation
Total 5,113 35.3 0-260 0.4 32.3 0-210 0.4
By WTO definition
Agricultural products 676 35.1 0-260 0.9 40.7 0-210 0.7
Live animals and products thereof 81 25.4 15-45 0.6 39.8 35-100 0.4
Dairy products 20 31.5 0-35 0.3 38.0 35-60 0.2
Coffee and tea, cocoa, sugar, etc. 128 37.6 15-192 0.4 39.6 35-170 0.4
Cut flowers and plants 34 25.1 10-45 0.6 29.9 10-35 0.3
Fruit and vegetables 150 32.7 0-127 0.5 36.6 25-115 0.3
Grains 16 0.0 0-0 - 49.4 0-100 0.8
Oils seeds, fats, oil and their products 71 38.9 15-45 0.2 56.2 15-100 0.5
Beverages and spirits 31 114.8 15-260 0.8 96.9 35-210 0.8
Tobacco 9 45.0 45-45 - 35.0 35-35 -
Other agricultural products, n.e.s. 136 27.8 0-45 0.5 28.1 0-50 0.4
Non-agricultural products (excl. petroleum) 4,435 35.4 0-192 0.3 31.1 0-170 0.3
Fish and fishery products 108 20.3 0-65 0.6 35.0 35-35 -
Mineral products, precious stones, etc. 335 37.5 0-45 0.3 30.6 0-55 0.3
Metals 588 32.5 10-45 0.2 32.0 5-35 0.2
Chemicals and photographic supplies 840 34.6 0-192 0.2 33.8 0-170 0.2
Leather, rubber, footwear, travel goods 146 39.8 0-45 0.3 32.1 0-35 0.2
Wood, pulp, paper and furniture 248 30.1 0-45 0.4 29.3 0-35 0.4
Textiles and clothing 830 43.7 25-55 0.1 31.3 15-35 0.2
Transport equipment 122 41.7 3-45 0.2 40.5 3-105 0.6
Non-electric machinery 525 27.1 10-45 0.2 25.9 0-35 0.2
Electric machinery 257 34.7 15-45 0.3 26.8 0-35 0.4
Non-agricultural products, n.e.s. 436 37.1 0-55 0.2 30.0 0-35 0.2
Table III.2 (cont'd)
                                                                                                                                                                    
domestic production.  The collected  tariff rate, which declined from 31% in 1996/97 to 21 % in 2000/01, is the
amount of customs duties as a proportion of the value of a given group of imported products;  it therefore takes
into account various exemptions and preferential rates.  However, the collected tariff rate does not necessarily
bear any relation to the "marginal" tariff rate, which is the most appropriate indicator of the potentialdead-weight (efficiency) losses caused by duties.  In particular, it attaches a small weight to the highly-protectedproducts, entirely ignoring prohibitive tariffs that do not yield any revenues, thereby tending to underestimatethe level of protection.  Consequently, collected tariff ra tes are not usually regarded as reliable indicators of the
potentially distorting effects of the tariff structure on domestic resource allocation.  As regards weighted
averages, the use of India's actual import volumes, like the collected tariff rate, assigns a small weight to the
highly-protected products and none at all to prohibite d tariffs, again tending to underestimate the degree of
protection.  (The use of variable-import weights can also result in spurious movements in weighted averagesover time as the weights themselves would tend to be inversely related to a country's tariff rates.)
25 Ministry of Finance (2002b),  Part B, paragraph 132.India WT/TPR/S/100
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MFN 1997/1998 MFN 2001/02
No. of
linesAverage
(%)Range
(%)Coefficient
of variationAverage
(%)Range
(%)Coefficient
of variation
Petroleum 2 31.0 37-35 0.2 25.0 15-35 0.6
By sectora
Agriculture and fisheries 289 26.5 0-45 0.6 33.1 0-100 0.4
Mining 105 26.2 0-45 0.5 21.9 5-55 0.5
Manufacturing 4,718 36.1 0-260 0.4 32.5 0-210 0.4
By stage of processing
First stage of processing 628 25.7 0-127 0.6 29.4 0-115 0.5
Semi-processed products 1,673 35.7 0-192 0.2 32.3 0-170 0.2
Fully-processed products 2,812 37.3 0-260 0.4 33.0 0-210 0.5
a ISIC (Rev.2) classification.  Electricity, gas and water are excluded (1 tariff line).
Source: WTO Secretariat calculations, based on data provided by the Indian authorities.
22. While the average tariff on non-agricultural products (WTO definition) fell from 35.4% to
31.1% between 1997/98 and 2001/02, the average tariff on agricultural products (WTO definition)
rose from 35.1% to 40.7% (33.8% to 41.7% for Chapters 1-24) during this period (Table III.2).  The
increases have taken place mainly for live animals, grains, oilseeds, and fats (Chapter IV(2)). In
addition, almost 94% of all tariff lines are subject to rates in excess of 15%.  Some 68.8% of tarifflines carry rates between 30% and 35%, and a further 18.7% of tariff lines are subject to rates of
between 20% and 25%.  Some 2% of the tariff curr ently has rates exceeding the "peak rate" of 35%
26;
the products concerned include edible oils (ranging from 40% to 100%), alcoholic beverages (from
100% to 210%), and motor vehicles (105%)27;  93.9% of all tariff lines are three times the average
tariff (international "spikes").  As a result partly of the decline in the "peak rate" in current Budgetproposals, the average tariff for agriculture is expected to fall to 36.8% in 2002/03 once the proposed
changes are approved.
23. The Indian tariff is also characterized by escalation, with tariffs rising from 29.4% for
unprocessed to 32.3% and 33% for semi-processed and processed products, respectively (Table III.2).
Escalation is especially pronounced in food, beverages and tobacco, wood and furniture, textiles andleather, and basic metals (Chart III.2).  De-escal ation, showing higher protection for unprocessed and
for semi-processed goods, is present in non-metallic mineral products, and for paper, printing, and
publishing.
24. Tariff dispersion, as measured by the standard deviation remains high at 13.0, albeit lower
than at the time of the last Review (14.0).
                                                     
26 This so-called "peak rate" should not be confused with tariff "spikes" (indicators 7 and 8) found in
Table III.1.
27 Tariffs in excess of the "peak rate" of 35% are found in 110 tariff lines at the HS six-digit level.WT/TPR/S/100 Trade Policy Review
Page 34
05101520253035404550
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherChart III.2
Tariff escalation by 2-digit ISIC industry, 1997/98 and 2001/02
Calculations exclude specific duties and include the ad valorem component of alternate and compound rates.  
WTO Secretariat calculations, based on data provided by the Indian authorities.05101520253035404550
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherAverage tariff rate in manufacturing
(36.1%)
Note:
Source :Per cent
First stage  of process ing Fully processed Semi-processedPer cent
Average tariff rate in manufacturing
(32.5%)2001/021997/98India WT/TPR/S/100
Page 35
(iv) Tariff exemptions and other concessions
25. India continues to provide a wide range of tari ff exemptions;  most are product specific, but
many are based on industrial or end-use.  Although it appears that the number of exemptions have
declined over the years, it was recently estimated that there are over 100 kinds of exemption, each
running into several pages.  The general notification for exemptions has 378 entries.  There are atpresent some 105 end-use exemptions.
28  415 entries are proposed for 2002/03.29  The use of such
exemptions not only increases the complexity of the tariff, it also reduces transparency and hampers
efficiency-increasing tools such as computerization of customs.  It has been suggested that removing
or reducing the exemptions and introducing a lower and uniform MFN duty structure would be more
simple and transparent, with clear implications for governance.30  As mentioned earlier, in his recent
budget speech, the Finance Minister indicated his intention to move towards two standard rates (10%
and 20%) and reduce exemptions.
26. As stated, due to the complexity of the exemptions, it was not possible to incorporate them
into the MFN tariff.31
27. The Indian Government also provides conc essions or exemptions on import duty under a
number of export-promotion schemes, although no evidence has been found that the exemptions have
increased exports in the sectors they have targeted (section (3)(viii)(b) below).32
(v) Tariff quotas
28. India maintains tariff quotas on imports of:  milk powder;  maize;  crude sunflower-seed and
safflower oil;  and refined rape, colza, and mustard oil.  All the quotas are allocated by the Directorate
General of Foreign Trade.  For milk powder, imports of up to 10,000 tonnes may enter annually at an
in-quota tariff rate of 15%, with an out-of-quota rate of 60%33;  the rates are the same for imports of
maize (other than seeds, HS 1005.90), for which the current tariff quota, released on 30 May 2001, is
400,000 tonnes.34  The quotas for maize are placed at the disposal of the Agricultural and Processed
Food Products Export Development Authority (APEDA)  and are currently allocated to state trading
companies, including the National Agricultural Cooperative Marketing Federation (NAFED),
Minerals and Metals Trading Corporation (MMTC), State Trading Corporation (STC), the Project andEquipment Corporation (PEC), State Cooperative Marketing Federations, and actual users of maize
for poultry and cattle feed and starch manufacture (section (xiii) below).  The in-quota rates for crude
sunflower-seed and safflower oil, and for refined rape, colza, and mustard oil are 50% and 45%,
respectively;  the out-of-quota rates are 75% and 85%.
                                                     
28 Central Board of Excise and Customs, Notification No. 17/2001.
29 Ministry of Finance (Central Board of Excise and Customs), Notification No. 21/2002 – Customs.
30 Planning Commission (2001b).
31 The Secretariat attempted to calculate the impact of these exemptions on the overall MFN rate, by
incorporating the exemptions at the eight-digit level, wh ere possible.  However, as most exemptions cannot be
included in the analysis, the overall average tariff is al most the same as that calculated using the standard rate
only.
32 Planning Commission (2001b).
33 For tariff lines 0402.10 and 0402.21, respectively.
34 APEDA, Trade Notice (APEDA/TN/TRQMaize/Imp/01/2001-02), 30 May 2001, [Online].
Available at:  http://www.apeda.com/a peda/maize2001.htm [10 September 2001].WT/TPR/S/100 Trade Policy Review
Page 36
(vi) Tariff preferences and rules of origin
29. Preferential rates of tariff are provided under various regional and bilateral agreements
(Table III.3).  Since its previous Review, India has signed a free-trade agreement with Sri Lanka,
which came into force on 1 March 2000 (Chapter II(2)(ii)).
30. There have been no changes in India's rules of origin since its last Review.  India does not
apply rules of origin for imports from MFN sources.  Preferential rules of origin are applied underbilateral and regional trade agreements (Table III.3).
Table III.3
Preferential rules of origin
Agreement Members Goods covered Rules of origin
Regional
South Asian Association
for Regional Cooperation
(SAARC)Bangladesh, Bhutan,
Maldives, Nepal, India,
Pakistan, and Sri LankaOver 2,500 tariff lines at the
HS six-digit level (generally
preferences of 5-10% of thestandard tariff rate of duty to
developing countries and 50-60%
to least developed country
members).Up to 40% of the f.o.b. value of
the finished good if produced in a
single country;  30% for LDCs;and 50% if several members are
involved.
Bangkok Agreement Bangladesh, India, the Lao
People's Democratic
Republic, Republic of Korea,
and Sri Lanka56 items (generally 5 percentage
points below the standard rate ofduty).Not less than 50% of the ex-
factory cost of the finished goods.
Preferential areas Mauritius, Seychelles, and
Tonga19 categories of products
(preferences ranging from 0-35%).Not less than 50% of the ex-
factory cost of the finished goods.
Bilateral
Bhutan n.a. All goods (preferential rate of 0). No specific rules of origin.
Nepal n.a. Mutually agreed primary products
and most industrial products
(preferential rate of 0).aNo specific rules;  goods are
considered to have been
manufactured in Nepal if they
involve manufacturing activity in
Nepal.
Myanmar n.a. Standard duty of 5% for rice,
pulses and beans, Chana, mustard
and rapeseed, ground nuts, freshvegetables and fruit, garlic and
onions, reed brooms, sesame seeds,
betel nuts, turmeric, dried ginger,coriander, fried chillies, poppy
seeds, and wood in the rough.No specific rules of origin.
Sri Lanka n.a. Some 1,300 tariff lines (0 rate of
duty);  50% preferential rate for allother goods except those on the
negative list.  Tariff quota rates of
50% of the standard rate apply togarment imports;  imports of tea
are allowed at a preferential rate of
duty of 7.5% under a tariff rate
quota.Minimum national content of
35%;  foreign content not toexceed 65% of the f.o.b. value of
the product (25% if the raw
material or inputs are sourced ineither country subject to the
condition that the aggregate value
addition in the contracting partiesis not less than 35% of the f.o.b.
value of the product).
n.a. Not applicable.
a Preferential treatment is not provided to imports from Nepal of:  alcoholic liquors/beverages and their concentrates, except
industrial spirits;  perfumes and cosmetics with non-Nepalese or non-Indian brand names;  and cigarettes and tobacco.
Additional duty continues to apply to imports of goods manufactured in medium and large-scale units in Nepal.
Source: Ministry of Finance (Central Board of Excise and Customs), Notification No. 430-Cus, 1 November 1976 (as
amended);  and information provided by the authorities.India WT/TPR/S/100
Page 37
(vii) Additional and special additional duties
31. Additional duties (ADs) are imposed on imports in lieu of a complex system of central excise
duties that successive governments have attempted to reform (see section (4)(ii) below), the purpose
being to correct the excise duty's bias in favour of imports.  However, the complexity of the excise tax
structure is such that there is ample scope for misclassification of items;  in particular, concordance
between the classification of products in the excise tax and the customs tariff schedules is notcomplete.
35  Thus, it is not clear whether the additional duty actually imposed on each imported item
corresponds to the excise tax levied on that item.  However, the Government is moving gradually
towards levying a single central excise duty rate of 16% on all but a few goods, and additional duty at
the same rate;  this would appear to reduce consid erably the scope for such misclassification.  The
authorities maintain that the scope for misclassif ication has been virtually eliminated with the
adoption of a single excise rate in respect of more than 95% of the lines and that the lack of alignment
does not result in any divergence between excise duty and additional duty
32. A special additional duty (SAD) of 4% was introduced on most imports in the 1998/99
Budget to tax imports "similarly" to state sales taxes (section (4)(i) below).36  As the SAD is an
across-the-board 4% tariff on most goods, it may not be equivalent to local sales taxes imposed onsimilar domestically produced goods, some of which may face higher or lower rates of sales tax.
However, it was not possible to take into account the impact of the additional and special additional
duties for the following reasons.  First, according to the authorities, while the excise and tariff
nomenclatures are harmonized at the HS two-digit level, there are discrepancies between the two
schedules at the HS six-digit level, at which the tariff is available.
37  Second, as in the case of
exemptions in the tariff, there are a number of ex cise tariff lines for which exemptions are provided
for end-users or industries, which cannot be incorporated into the standard excise duty rates.
(viii) Import prohibitions, restrictions, and licensing
(a) Import prohibitions
33. Import prohibitions and restrictions are maintained under Section 11 of the Customs Act,
1962, which allows the Central Government to prohibit imports or exports of certain goods, either
absolutely, or subject to conditions, by notification in the Official Gazette .38  Since its previous
Review, India has added beef and beef products to its list of import prohibitions (Table III.4).  In
                                                     
35 According to the authorities, the two schedules are harmonized at the HS two-digit level;  however,
since excises relate to the concept of manufacture rather than trade, some ambiguity may arise in classification
at the HS six-digit level.  According to a report by an advisory body to the Planning Commission, it has beensuggested that such discrepancies could be minimized if appropriate and specific definitions are included in theexcise tariff (Planning Commission, 2001b).
36 The authorities state that the special additional duty is required in order to remove or reduce the pro-
import bias resulting from the application of these taxes to domestically manufactured goods only.  An 8% taxwas originally proposed in the budget speech, but this was scaled back to 4%.
37 According to the authorities, these discrepancies may be because the excise duty is a duty on
"manufacture" and not on "trade" or "sale".  In case of such discrepancies arising, the authorities state that theclassification of any imported good must be determined under the Central Excise Tariff Rules to calculate the
additional duty rate, using the Rules of Interpretation of the Excise and MFN tariff schedules, which are
identical.
38 Under Section 11(2), the reasons for such a prohibition include, inter alia , security, public order,
morality, prevention of smuggling, and the conservation of foreign exchange and safeguarding the balance-of-payments (Government of India, Customs Act, 1962 ).WT/TPR/S/100 Trade Policy Review
Page 38
addition, the prohibition on waste, parings and scrap plastics, was relaxed by allowing imports of
these products by export-processing zones.39
Table III.4
Import prohibitions, 2001
Product prohibited for import on 1 April 2001 Status on 1 April 1997
Tallow, fat and/or oils, rendered, unrendered or otherwise, of any animal origin, including the
following:
(i) Lard stearine, oleo stearine, tallow stearine, lard oil, oleo oil and tallow oil not
emulsified or mixed or prepared in any way;
(ii) Neat's-foot oil and fats from bone or waste;(iii) Poultry fats, rendered or solvent extracted;(iv) Fats and oils of fish/marine origin, whether or not refined, excluding cod liver oil, squid
oil containing Eicospentaenoic acid and De-cosahexaenoic acid;  and
(v) Margarine, imitation lard and other prepared edible fats of animal origin.prohibited
Animal rennet prohibited
Wild animals including their parts and products and Ivory prohibited
Beef and products containing beef in any formanot prohibited
a DGFT, Notification No. 29 (RE-2000)/1997-2002, 7 August 2000.
Source: WTO (1998), Trade Policy Review - India ;  and Ministry of Commerce (1997), Export-Import Policy 1997-2002 ;
and amending notifications up to August 2001.
(b) Import restrictions and licensing
34. Import restrictions may be imposed by the Government of India under the Customs Act,
1962, and the Foreign Trade (Development and Regulation) Act, 1992.  India's import licensing
measures were maintained under GATT Article XVIII:B, for balance-of-payments reasons.  At the
time of the last Review, some 32% of the tariff was subject to import restrictions under
Article XVIII:B.40  However, as a result of consultations with Australia, Canada, the European
Communities, New Zealand, and Switzerland, and a dispute with the United States, a mutually agreedsolution on phasing out the remaining restrictions by 1 April 2001 was notified to the WTO in
January 2000.
41    Accordingly, India notified the WTO of its removal of restrictions on 714 and
715 import items in December 2000 and February 2002, respectively.42  In addition, it appears that the
Special Import Licence (SIL), which was accorded to certain importers, has been discontinued since
1 April 2001.43  Previously, when items were liberalized, they were first moved from the non-
automatic licensing list to a list subject to SILs, and then de-restricted.
35. While most products previously restricted for balance-of-payment reasons have been
de-restricted, restrictions are maintained on some products for reasons of health, security, and public
                                                     
39 Initially notified as an import prohibition in November 1998 (Notification No. 32 (RE-98)/97-02);
this prohibition was relaxed a month later (DGFT, Eximpolicy Notification No. 37 (RE-98)/97-02,
23 December 1998).
40 WTO (1998).
41 India also informed the Committee on Import Lice nsing Procedures that it had liberalized imports of
a number of items on 13 April 1998 (WTO document G/LIC/N/2/IND/1, 18 June 1998);  and on 31 March 1999(WTO document G/LIC/N/1/IND/2, 23 September 1999).
42 WTO documents G/LIC/N/1/IND/3, 13 December 2000, G/LIC/N/1/IND/4, 27 February 2002, and
G/LIC/N/2/IND/4, 27 February 2002.  According to the authorities all these restrictions have been removed,
with the exception of palm stearin, other than crude (HS Ex 382311.01), and other parts for watches(HS 911490.01);  the paperwork to remove restrictions on these products is currently being completed.
43 Ministry of Commerce and Industry (2001a).India WT/TPR/S/100
Page 39
morals.  These include firearms, explosives and ammunition, certain medicines and drugs, and
jewellery, notified by India under Articles XX and XXI of the GATT 194744, as well as products
protected under the Wildlife Protection Act, 1972, the Convention on International Trade in
Endangered Species (CITES), and the Montreal Protocol on Substances that Deplete the Ozone Layer.
India also restricts the import of poppy seeds, which may be imported from certain countries and
subject to certain conditions.45  Licensing requirements are in place for seeds for sowing and for
agricultural and food products under India's sanitary  and phytosanitary laws (section (xiii) below).
36. Import restrictions are maintained for imports of second-hand motor vehicles, which must not
be older than three years from the date of manufacture, for environmental reasons.  In addition, they
must meet conditions required under the Motor Vehicles Act, 1988, including, inter alia,  right-hand
steering and controls, and a speedometer indicating speed in kilometres;  acco rding to the authorities,
the restrictions are maintained for consumer protection and road safety reasons as India follows the
metric system and has right-hand drive traffic conditions.  Importers of second-hand motor vehicles
not older than three years are required to submit supporting documents at the time of import,
including a certificate showing that the vehicle has been tested immediately before shipment to India
and conforms to regulations specified in the Motor Vehicles Act, 1988;  they must also produce acertificate declaring a minimum roadworthiness of five years from the date of import.  Second-hand
motor vehicles (not older than three years) may be imported only through the customs port at
Mumbai;  new vehicles may be imported only through the customs ports of Chennai, Kolkata, and
Nhava Sheva.
46  The authorities argue that the requirement to import through certain ports is
necessary to monitor these technical requirements.  Nonetheless, the outcome is that more stringent
(i.e. prohibitive) standards are applied to imported used cars over three-years old than to domestic
used cars of the same age.  As of December 2001, all imports of natural rubber must be carried outthrough the ports of Kolkata and Visakhapatham.
47
37. The Government has also issued a list of 300 se nsitive items, whose import it monitors;  the
items include milk products, fruit and nuts, coffee, tea, spices, cereals, oilseeds and edible oils,
alcoholic products, silk, new and second-hand motor vehicles up to three years old, and toys.48  The
monitoring, based on monthly import data on these products, is carried out by a committee chaired bythe Secretary of Commerce.  Measures taken initially to allow imports of these products only through
certain ports of entry have been discontinued, although certain products, such as second-hand cars
(under three years old) and products subject to preferential tariff rates under bilateral trade
agreements, must enter at specified ports.
49
                                                     
44 WTO document WT/BOP/N/24, 22 May 1997.
45 Ministry of Commerce and Industry, Notification No. 27 (RE-2000)/1997-2002, 1 August 2000.
46 The vehicle is required to be re-tested once in India by an agency certified by the Government
(Ministry of Commerce and Industry, Notification No. 4(RE-2001)/1997-2002, 13 March 2001).
47 Ministry of Commerce and Industry, Department of Commerce, Notification No. 41
(RE-2001)/1997-2002, 19 December 2001.
48 Imports of most of these items were restricted to entry points at Chennai, Cochin, Delhi, JNPT,
Kolkata, Mumbai, Tughlakabad, and Vishakhapatnam;  imports of some second-hand and used motor vehicleswere allowed only through Mumbai (Ministry of Commerce and Industry, Notification No. 11 (RE-2001)/1997-
2002, 2 May 2001.  Entry was extended for some products to the ports of Bedi, Haldia, Jamnagar Kakanadi,
Kandla, Marmagoa, Mundra, and New Mangalore (Ministry of Commerce and Industry, Notification No. 12(RE-2001)/1997-2002, 8 May 2001.
49 Both notifications were revoked on 21 May 2001 (Ministry of Commerce and Industry, Notification
No. 13(RE-2001)/1997-2002, 21 May 2001).WT/TPR/S/100 Trade Policy Review
Page 40
(ix) Minimum import prices
38. Minimum import prices on steel products were withdrawn by the Central Government
through a notification issued in November 1999;  the notification was expected to have become
effective on January 2000.  However, the authorities state that the notification has been stayed by the
High Court in Kolkata for HR coils.  Minimum import prices are maintained for seconds and
defective steel products, for human health and safety reasons.
(x) Countertrade
39. According to the authorities, there is no la w requiring Indian exporters to enter into
agreements on countertrade.  However, global tenders have sometimes included a clause providing
preferences to companies who agree, ceteris paribus , to countertrade operations.  The major state-
owned companies that have b een involved in countertrade  in the past were the Minerals and Metals
Trading Company (MMTC), and the State Trading Company (STC).
(xi) Contingency measures
(a) Anti-dumping and countervailing measures
40. There have been no major changes in anti-dumping and countervailing legislation since the
previous Trade Policy Review of India;  Indi a's legislation came into force on 1 January 1995
(Box III.1).50
41. The major administrative change since the previous Review is the establishment of the
Directorate General of Anti-Dumping and Allied Duties, in the Ministry of Commerce, to conduct all
anti-dumping and countervailing investigations.  The Directorate General, which is headed by the
Additional Secretary in the Ministry, was established in April 1998.  Appeals on decisions taken by
the Directorate General may be made under Chapter XV (section 129) of the Customs Act, 1962, to
the Appellate Tribunal, and, as a last resort, to the Supreme Court.  The Appellate Tribunal, alsoknown as the Customs, Excise and Gold (Contr ol) Appellate Tribunal, consists of at least
two members, one judicial and one technical.  Since the formation of the Tribunal, 34 cases have been
filed, of which the decision of the Directorate General of Anti-Dumping and Allied Duties was upheld
in 22 out of 29 rulings;  the Tribunal rejected three cases and modified the original decision taken by
the Directorate General in four cases. The authorities maintain that the Tribunal is independent fromthe Directorate General of Anti-Dumping and Allied Duties, as the former is constituted under the
Customs Act 1962, while the latter is appointed under the Rules made under the Customs Tariff Act
1975.
51  In addition, a Committee was established in August 2001, headed by the Director General of
the Directorate of Anti-Dumping and Allied Duties, to examine, inter alia, the adequacy of laws and
procedures governing anti-dumping investigations and consistency between the rules and statutes ofthe Directorate and the rulings of the Central Excise and Gold (Control) Appellate Tribunal.
52
                                                     
50 India's legislation with regard to anti-dumping an d countervailing procedures is contained in sections
9, 9A, and 9B of the Customs Act, 1975, as amended by the Customs Tariff (Amendment) Act, 1995 and theCustoms Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for
Determination of Injury) Rules, 1995 (WTO documents G/ADP/N/1/IND/1, 15 August 1995,
G/ADP/N/1/IND/2/Corr.1, 9 January 1996, an d G/ADP/N/1/IND/2/Su ppl.1, 23 December 1996).
51 WTO document G/ADP/Q1/IND/5, 23 April 1997.
52 Ministry of Commerce, Press Release, 15 August 2001, [Online].  Available at:
http://commin.nic.in/doc/aug01_release.htm [22 August 2001].India WT/TPR/S/100
Page 41
42. Since the passage of its legislation on anti-dumping, India has become a major user of
anti-dumping measures;  250 anti-dumping actions were initiated since 1995.53  Moreover, the number
of anti-dumping measures in force has risen stea dily, especially since 1997, from 19 notified measures
in force, to 131 in 2001 (Chart III.3).54  The majority of the initiations have been for chemical and
related products (47.2%);  a large number of actions have been initiated against imports from the
European Union (19.2%) and China (18.8%).55
43. As notified to the WTO, India had not taken any countervailing measures up to
30 June 2001.56
(b) Safeguards
44. Safeguard measures may be taken by the Central Government under Article 8B of the
Customs Tariff Act, 1975 as amended in 1997.57  Under the Customs Tariff (Identification and
Assessment of Safeguard Duty) Rules, 1997, safeguard investigations are carried out by the
Director General of Safeguards based in the Department of Revenue, Ministry of Finance.
Investigations may be initiated upon receipt of a written application by or on behalf of the domestic
industry or by the Director General if there is evidence of serious injury from increased imports.
There have been no changes in procedures for investigating and imposing safeguards since theprevious Review.
58
45. Since the passage of its legislation, India has imposed safeguard duties on eight products59;
the final findings of the Director General (S afeguards) for Methylene Chloride, recommend
imposition of safeguard duties, but this is yet to be notified.
                                                     
53 Based on notifications of anti-dumping actions initiated made to the WTO Secretariat up to
end 2001.
54 Initiations as well as measures in force increas ed significantly in 1998, the same year as the
Directorate General of Anti-Dumping and Allied Duties was established.
55 According to the authorities, the removal of quantitative restrictions on imports has not led to a
corresponding surge in imports of these products;  however, cases relating to specific products, if any, have been
given necessary relief by the Directorates of Anti-Dumping and Safeguards (Ministry of Finance, 2002a,Box 6.4).
56 WTO document G/SCM/N/75/Add.1, 17 October 2001.
57 Finance Bill No. 25 of 1997, Chapter V.
58 Preliminary findings must be reported in a public notice, with a copy to the Ministries of Commerce
and Finance;  provisional safeguard measures based on these findings may be imposed for a maximum period of
200 days.  Final findings and any recommended safeguard duties must be notified within eight months from thedate of initiation through a public notice.  Provisional measures must be removed within 30 days if theinvestigation reveals no injury.  A final safeguard measure may be in place for four years unless the CentralGovernment deems it necessary to continue the measure for longer, in which case it may not remain in place formore than ten years from when it was first imposed.  If the duration of the safeguard measure is over one year, it
must be progressively liberalized at regular intervals within the period of duration.
59 These are:  acetylene black (10 December 1998);  carbon black (9 October 198);  flexible slabstock
polyol (24 December 1998);  hard board (12 November 1998);  styrene butadiene rubber (1 May 1998);  phenol(28 June 1999);  acetone (27 January 2000);  white/yellow phosphorus (17 January 2000);  and gamma ferrieoxide/magnetic iron oxide (24 January 2001).WT/TPR/S/100 Trade Policy Review
Page 42
Box III.1:  Anti-dumping and countervailing procedures
Anti-dumping
An anti-dumping investigation may be initiated by the Directorate General of Anti-Dumping and Allied
Duties by or on behalf of the domestic industry, where:  domestic industry supporting the application mustaccount for at least 25% of the total domestic produc tion, and the collective output of domestic producers
supporting the application constitutes more than 50% of the total output by those expressly supporting and
those opposing the application, or suo motu , if it is satisfied that there is evidence regarding dumping or
injury.  The Directorate must issue a public notice of its decision to initiate an investigation, along with thetime limits allowed for interested parties to make  their views known (Section 6(1));  according to the
authorities, this normally takes place within 45 days of the receipt of proper documentation.  Interestedparties may provide any relevant information to the Di rectorate within 30 days of receipt of the notice or
any further period of time as specifi ed by the Directorate (Section 6(4)).
Preliminary findings , according to the authorities, would normally be made within 150 days of the
initiation.
Provisional duties  may be imposed by the Central Government on the basis of preliminary findings reached
by the Directorate;  the provisional duty should not exceed the margin of dumping and may be imposedbefore the expiry of 60 days from the date of public notice issued by the Directorate initiating the
investigation.  The duty may remain in place for a period not exceeding six months and may be extended to
nine months upon request of exporters representing a significant percentage of the trade involved (Section13).  The investigation may be terminated if the Directorate finds that, inter alia,  the margin of dumping is
less than the de minimus  margins.
Final findings  must be notified to the Central Government within a period of one year from initiation of the
investigation, although this period may be extended by the Central Government for a period of six months
(Section 17(1)(a)).  Definitive anti-dumping duties  not exceeding the margin of dumping would be imposed
within three months of the publication of the final fi ndings and would remain in place for a five-year period
unless extended for periods of five years by the Directorate.
Countervailing
Countervailing investigations are also carried out by the Directorate General of Anti-Dumping and Allied
Duties, under the Customs Tariff Act and the Customs Tariff (Identification, Assessment and Collection of
Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995.  Procedures toinvestigate subsidies that are liable for countervailing duty are subject to similar time limits as anti-dumping investigations.  A decision to initiate an inve stigation must be notified through a public notice,
which may call for any relevant information to be provided within 30 days of receipt of notice (assumed tobe seven days from transmission by the Direct orate), from interested parties (Section 7(4)).
Provisional duty,  based on preliminary findings by the Directorate, must be imposed before the expiry of
60 days from the date of issue of the decision to initiate the investigation.  Provisional duties may remain inforce for a maximum period of four months.
Final findings  must be made within one year of the date of initiation and may in exceptional circumstances,
be extended by the Central Government for a further six months.  Through notification in the Official
Gazette , the Central Government, upon recommendation by the Directorate General of Anti-dumping and
Allied Duties, may impose definitive countervailing duty  within three months of the final findings being
published.
Source: WTO documents G/ADP/N/1/IND/2, 15 August 1995;  and G/ADP/N/1/IND/2/Suppl.2,
18 August 1999.India WT/TPR/S/100
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020406080100120140
1995 1996 1997 1998 1999 2000 2001
Source :  Notifications to the WTO;  and information provided by the authorities.Other East Asia
3.6United States
5.6
Japan
7.2Singapore  4.0EU
19.2
Base metals
 & products 
thereof
9.6
Korea, Rep. of
6.4China
18.8Other  4.0Chemicals & products 
thereof
47.2
Pulp of wood,
paper or 
paperboard
3.2Machinery, 
mech. applicances 
& electrical equip.
     10.0(b) Initiations by product
Per cent(c) Initiations by origin 
Per centChart III.3
Anti-dumping measures, January 1995 - December 2001
(a) Number of cases initiated and measures in force
Cases initiated 
East Asia
52.8Middle East
5.2
Plastics & rubber
 & products thereof
11.6Textiles & 
articles 
thereof
13.6Other
4.8
Indonesia
2.8Thailand  4.0Chinese Taipei
6.0Measures in forcea
a    Anti-dumping measures in force on 31 December.
Russian Federation
4.0 Other Europe
9.2WT/TPR/S/100 Trade Policy Review
Page 44
(xii) Standards, testing, and certification
(a) Standards
46. There have been no significant changes in the legislative basis of India's technical standards.
India notified the WTO that the Bureau of Indian Sta ndards, the national standards body of India, had
been designated as the WTO-TBT Enquiry Point, while the Ministry of Commerce is responsible forimplementing and administering the WTO Agreement on Technical Barriers to Trade.
60  India
accepted the Code of Good Practice on 19 December 1995.61
47. Indian standards are formulated by the Bureau of Indian Standards (BIS), which was
established as a statutory body under the Bureau of Standards Act, 1986, and became operational on
1 April 1987.62  Standards are developed through 15 divi sion councils, covering a wide number of
sectors (Box III.2).63  From its formation until 1 April 2001, the BIS had developed 17,428 voluntary
standards relating to a number of sectors.  In order to ensure their continued relevance, Indian
standards are reviewed as and when considered necessary, but at least once every five years.
Box III.2:  Development of Indian standards
Proposals for establishing new standards or for revising existing standards may be submitted in writing to
the Bureau of Indian Standards (BIS) by Ministries  and agencies of the central and state governments,
professional associations including consumer organi zations, industrial units, industry associations and
professional bodies, and members of the BIS and of its technical committees.  The proposal is examined
within the relevant Division Council, of which there are currently 15.  Formulation of the new or revisedstandard is entrusted to an appropriate existing technical committee or, if necessary, a new technicalcommittee, which is appointed by the Division Council.
The draft standard is issued and circulated for a period of at least three months amongst the various interest
groups concerned.  The Technical Committee may also decide not to circulate the standard, if necessary,
including when the standard is considered urgent or non-controversial.
Upon incorporation of comments deemed to be releva nt by the Technical Committee, the draft standard is
finalized and must be approved by the Sectional Committee before being submitted to the Chairman of theDivisional Council for adoption.  All Indian standards must be reviewed periodically and at least once everyfive years;  standards that need not be revised in th e view of the Sectional Committee must be reaffirmed by
the Committee.  According to the authorities the process of drafting new standards may take between one
year in the case of harmonization with international standards, and two-three years for the formulation ofnew standards.
Source: Information provided by the Indian authorities.
                                                     
60 WTO document G/TBT/2/Add.56, 22 October 1999.
61 WTO document G/TBT/CS/N/26, 29 January 1996.
62 The BIS has its main office in New Delhi, with five regional and 19 branch offices around the
country.  To support its testing and certification activitie s, the BIS has a network of eight laboratories across
India, which provide conformity testing and calibration services.  In addition, the BIS recognizes and uses theservices of a number of laboratories, which follow international criteria, including ISO/IEC Guides for testing.
63 The sectors or activities currently covered are:  basic and production engineering;  chemicals;  civil
engineering;  electronics and telecommunications;  electrotechnical;  food and agriculture;  mechanicalengineering;  management and systems;  medical equipment and hospital planning;  metallurgical engineering;petroleum, coal, and related products;  transport engineering;  textiles;  and water resources (Bureau of IndianStandards online information.  Available at:  http://www.bis.org.in/sfp1.htm [21 August 2001]).India WT/TPR/S/100
Page 45
48. As a matter of policy, the BIS endeavours to align Indian standards as far as possible with
international standards.  As of 1 April 2001, 3,020 Indian standards (some 17%) had been harmonized
with international standards;  during the period from 1998 to 2001, however, the percentage of
standards that have been harmonized with international standards is considerably higher, averaging
around 42%.
49. The BIS, which was a founder member of the International Standards Organization (ISO),
continues to participate in technical and policy-making committees of the ISO, and the International
Electrotechnical Commission (IEC).
(b) Certification
50. Indian and foreign manufacturers who meet a BIS standard may carry the BIS Certification
Mark.  The BIS Certification Mark was made mandatory for 133 items (both locally produced andimported).
64  The BIS laboratories provide conformity testing for products (both domestic and
imported) requiring BIS certification.  Voluntary certificates are also issued for environmentally
friendly products (Ecomark), environmental management systems, quality systems, and hazard
analysis and critical control points (HACCP).  Licences granted for quality systems, environmental
management systems, and HAACP are valid for three years and must be renewed.  The BIS carriesout regular surveillance audits and inspections to ensure that the systems and products meet the
relevant standards.  All the BIS certification schemes are operated according to the relevant ISO/IEC
guides and the quality system certification scheme is accredited by the Dutch Council for
Accreditation (Raad voor Accreditatie).
(xiii) Sanitary and phytosanitary measures
51. There is no single agency to implement sanitary and phytosanitary regulations;  instead,
measures are maintained under a number of Acts, which are implemented by different agencies.
65
The main change since the last Review of India is the introduction of the Livestock Importation
(Amendment) Ordinance in 2001, which amends the Livestock Importation Act, 1898 under which
(along with the Meat Food Product Order, 1973) the inspection of animals and meat products is
mandatory.  Under a notification issued in October 2001, "livestock products" include products, eggs,
and seeds of all aquatic animals;  imports of all these products require a sanitary import permit issuedby the Department of Anim al Husbandry and Dairying.
66
52. Under the Export and Import Policy, all imports of primary agricultural products are subject
to a Bio Security and Sanitary-Phytosanitary import permit issued by the Department of Agriculture
and Cooperation under the Plants, Fruit and Seeds (Regulation of Import into India) Order, 1989.  The
                                                     
64 DGFT, Notification No. 44 (RE-2000)/1997-2002, 24 November 2000;  and No. 7 (RE-2001)/1997-
2002, 31 March 2001.
65 For food safety and quality, the main legislation is the Prevention of Food Adulteration Act, 1954;
inspection of imports of and domestically produced agricultural products is mandatory under the Essential
Commodities Act, 1955, the De-Oiled Meal and Edible Flour Control Order, 1967, the Fruit Product Order,1955, and the Plants, Fruit and Seeds (Regulation of Imports into India) Order, 1989.  Inspection of animals andmeat products is mandatory under the Meat Food Products Order, 1973 and the Livestock Importation Act,1898, amended in 2001.
66 Other recent notifications include restrictions on the import of "grand parent stock" of live poultry,
which are only allowed if accompanied by a sanitary import permit issued by the Department of Animal
Husbandry and Dairying;  and a six month prohibition on imports of domestic and wild birds, day-old chicks,hatching eggs, fresh meat of domestic and wild birds, and products of animal origin from birds used in animalfeed or by industry from countries reporting and outbreak of Avian Influenza (Notification Nos. 590 and 591,Ministry of Agriculture, Department of Animal Husbandry and Dairying).WT/TPR/S/100 Trade Policy Review
Page 46
permits are issued on the basis of import risk analysis based on scientific principles, including,
inter alia , the types of pests associated with the particular product being imported and their potential
impact on India's international trade.67
53. Other sanitary and health regulations are found in the Drugs and Cosmetics Act, 1940, and
accompanying rules, as amended, which govern quality control for pharmaceutical products as well as
alternative Indian medicines such as ayurveda, unani, and siddha systems.  The Act and itsaccompanying rules are administered by the Ministry of Health and implemented by the state
governments.  All new pharmaceutical products, whether imported or domestically produced, must
first be approved by the Central Drugs Standard Control Organization, headed by the Drugs
Controller of India, before they may be marketed in India.
(xiv) Labelling and marking
54. India's legislation on labelling and marking is contained in the Prevention of Food
Adulteration Act, 1955, last amended in 1986, and in Part VII of the Prevention of Food Adulteration
Rules 1995.  Requirements include, inter alia :  the name, trade name, or description of food;
ingredients in descending order of their composition by weight or volume;  the name and address of
the manufacturer or importer or packer;  net weight or number or measure of volume;  and best-before
dates.  For packages containing aspartame, the expiry date must be included and cannot exceed three
years from the date of packaging.
68  The Standards of Weights and Measures (Packaged
Commodities) Rules were issued in 1977 to regulate packaging and to rationalize standard quantities
and measures.
55. With regard to imports, a notification was issued recently requiring all packaged products
subject to the provisions of the Standards of Weights and Measures (Packaged Commodities) Rules,
1977, when produced, packed or sold in India, to carry the following information:  (i) name and
address of the importer;  (ii) generic or common name of the commodity;  (iii) net quantity in terms of
standard unit of weights and measures (or its equivale nt if given in any other unit);  (iv) month and
year in which the commodity was manufactured, packed, or imported;  and (v) maximum retail sale
price (including all taxes, freight, transport char ges, commission payable to dealers, and all other
charges including for advertising, delivery, and packing).69  Furthermore, as of July 2001, all imports
of edible products, for which the domestic manufacture and sale are governed by the Prevention of
Food Adulteration Act, 1954, must, at the time of importation, have a valid shelf life of not less than
60% of their original shelf life;  according to the authorities, this condition is necessary to ensure that
food products whose shelf life has expired are not sold in the market.70
                                                     
67 Ministry of Commerce, Notification No. 3(RE-2001)/1997-2002, 31 March 2001.
68 More specific instructions are to be followed for certain products.  Further details can be found in the
Prevention of Food Adulteration Act and in Part VII of the Rules.
69 Ministry of Commerce, Notification No. 44 (RE-2000)/1997-2002, 24 November 2000, Directorate
General of Foreign Trade.
70 The shelf life of the product is calculated on the basis of the date of manufacture and expiry date on
the package.  The 60% period has been determined by  taking into account the overall time taken to import
products.  (Ministry of Commerce, Notification No. 22 (RE-2001)/1997-2002, 30 July 2001, DirectorateGeneral of Foreign Trade).India WT/TPR/S/100
Page 47
(xv) Government procurement
(a) Introduction
56. India is not a Member of the WTO Agreemen t on Government Procurement.  In 2000/01 the
estimated value of purchases by the central government procurement agency, the Directorate General
of Supplies and Disposals (DGS&D) was Rs 32.8 billion (around US$0.8 billion);  additional
procurement by ministries of central and state governments as well as public sector enterprises wasestimated at around Rs 23.1 billion (approximately US$0.6 billion) for the year 2000/01 up to
December 2000.
71
57. There appear to have been no major changes to government procurement procedures since the
last Review of India.  Government procurement policies are based on the General Financial Rules of
the Ministry of Finance.  Although the Directorate General of Supplies and Disposals was establishedas the central purchasing agency for all government ministries and departments, government
procurement has been decentralized over the years.  Thus, key ministries such as Railways, Defence,
Posts and Telegraphs have been authorized since 1974 to make their own purchases.  Procurement
was further decentralized in 1991 with the result that the DGS&D mainly undertakes contracts for
items required on a recurring basis by central government departments.  In addition, stategovernments, public-sector units and semi-autonomous bodies may also use the services of the
DGS&D if they wish to do so.
72  The purchase contracts maintained by DGS&D allows the
procurement of goods from reliable sources without the need for recurrent tenders by each
government department as the need arises;  as of 1 December 2001 these contracts were maintained
for 367 items.73
(b) Tendering procedures
58. In general, under the General Financial Rules of the Ministry of Finance, purchases of up to
Rs 1,000 may be made without tendering.  Purchases valued at between Rs 1,000 and Rs 10,000 may
be made by department heads without calling for tenders or through pre-selection from the list of
contracts maintained by the DGS&D;  nevertheless, in such cases, quotations from suppliers must be
invited.  Department heads also have discretion in deciding whether to advertise tenders abroad.74
59. For purchases with a value of over Rs 10,000, procurement is carried out through tendering
(open, limited or single tender, or negotiation).  For all cases where the value of the purchase is above
Rs 200,000, the General Financial Rules call for an open tender system;  tenders must be published in
the Indian Trade Journal  issued by the Director General of Commercial Intelligence and Statistics,
Calcutta, in addition to Indian newspapers, if necessary.  Limited and single tenders are used for
purchases below Rs 200,000  in value and are based on a list of approved contractors maintained by
the DGS&D.  The contractors on this list are reviewed by the DGS&D once every three years.
Limited tenders should include contractors that have been granted procurement contracts in the past in
addition to 15 other companies on the list.  Single tenders may be used in the case of availability of
the product with a single known supplier or in th e case of "proprietary" goods.  Goods may also be
procured in this manner in special circumstances, such as in the case of a monopoly supplier or wherethere is a shortage of capacity.  Limited and single tenders must also be used for important plant,
                                                     
71 Ministry of Commerce and Industry, Department of Commerce (Supply) (2001).
72 Ministry of Commerce and Industry, Department of Commerce (Supply) (2001).
73 Ministry of Commerce and Industry, Department of Commerce (Supply) (2001), Annex XIII.
74 Appendix 8, Rule 2.WT/TPR/S/100 Trade Policy Review
Page 48
machinery, and iron and steel works with purchases being made from the DGS&D's list of approved
contractors.75
60. Non-Indian suppliers must be registered with the DGS&D through their local agents;
companies that have the necessary arrangements for after-sales services in India may register directly
with the DGS&D.
(c) Preferences
61. Although preferences for procurement through local suppliers have been reduced greatly
since 1992, preferred sources for procurement include the public sector and the small-scale sector.  At
the time of the last Review, procurement of 405 specified products had to be from the small-scale
sector, including 75 from the handicraft and handloom sectors.  The list has been reduced to 350 items
from the small-scale sector and eight items from the handicraft and handloom sector;  in addition, thepresent guidelines on procurement from these sectors are advisory and non-mandatory.  Another
advisory and non-mandatory preference is a price preference for the small-scale sector of up to 15%,
on a tender-by-tender basis if the small-scale unit has successfully bid for previous contracts by
competing with large-scale units on a non-preferential basis;  an advisory and non-mandatory price
preference of 10% is also applicable to public-sector  companies.  According to the authorities, of the
purchases made in 2000/01 by the DGS&D, around 7.7% and 11.9% were made from the public and
small-scale sectors, respectively.
62. Price preferences of up to 15% may also be granted for indigenous-equipment suppliers (up to
30% for exports of ships)
76;  indigenous equipment is defined as such if at least 20% of the value of
the product is added in India.  Cargo preferences are also provided to Indian ships for the carriage of
dry bulk cargo and for petroleum and other liquid oil cargo in Indian territorial waters.77
(xvi) State-trading
63. India states that food grains and certain agricultural products are subject to procurement by
state trading companies to guarantee remunerative minimum support prices guaranteed to farmers for
these products.  Food grains form part of the Go vernment's public distribution system and state
trading companies are used to monitor supply of these products so as to address food security
concerns.  Other products, such as gasoline and fertilizers, are imported through state tradingcompanies to allow domestic subsidization in th e case of fertilizers and cross subsidization for
petroleum products.
78
64. Since the last Review of India, there has been a significant reduction (at the HS ten-digit
level) of products subject to state-trading, mainly  involving edible oils, seeds, and some petroleum
products (Table III.5).79  The value of imports by state trading companies, with the exception of
petroleum oils (other than crude oil) has been declining, and was estimated to be some Rs 55 billion in
                                                     
75 The list includes heavy machinery, electronics, rolling stock, machine tools, motor vehicles, aircraft,
and fire fighting equipment (Ministry of Commerce and Industry, Department of Commerce (Supply) (2001),Schedule A and Rule 4 in Appendix XVIII).
76 The 30% preference for exporters of ships is meant to offset taxes paid by the constructor.
77 The requirement that dry bulk cargo be carried by an Indian ship if the goods originate in India or if
transport is the responsibility of the Indian party (WTO, 1998) has been discontinued.
78 WTO document G/STR/N/7/IND, 8 October 2001.
79 On 1 April 1997, over 170 lines at the HS eight- and ten-digit levels were subject to state trading.  As
of India's notification in October 2001, there appear to be some 30 lines at the HS eight- and ten-digit levelssubject to imports by state trading companies.India WT/TPR/S/100
Page 49
2000/01 (2% of merchandise imports, down from 19% in 1996/97);  the main import was petroleum,
which accounted for around 98% of all imports by state trading companies.80
Table III.5
Imports subject to state trading, 1997 and 2001
1 April 1997 1 April 2001 Agency
Petroleum products including:
- Aviation turbine fuel;- Crude oil;- Kerosene;- Liquified petroleum gas (LPG);- Motor spirit;- Bitumen (asphalt)-paving grade;- Naphtha;  and- Furnace oilPetroleum products including:
- Aviation turbine fuel;- Aviation spirit;
- All types of spirit type (gasoline
type) jet fuel;
- Motor spirit (gasoline);- Diesel gas oil;  and- Other gas oil.Indian Oil Corporation Limited
All types of nitrogenous phosphatic, potassic
and complex chemical fertilizers except DAP
fertilizerUrea, whether or not in aqueous solution Minerals and Metals Trading
Corporation of India Limited;  and
Indian Potash Limited
Ammonium sulphonitrite Unchanged Minerals and Metals Corporation of
India Limited
Edible oils including coconut, groundnut,
safflower, palm, rapeseed, sunflower, soyabean
and cotton seed oilsCoconut oil and its fractions State Trading Corporation of India
Limited and Hindustan Vegetable
Oils Corporation Limited
Copra, groundnut, palm, rapeseed, safflower,soyabean, sunflower and cotton seedsCopra State Trading Corporation of India
Limited and Hindustan Vegetable
Oils Corporation Limited
All other non-edible oils (excluding tung oil,China wood oil and natural essential oils, seeds
or material from which oil can be extracted)Removed
Most cereals excluding feed grade maize,
poultry or animal feedSome cereals (wheat, rye, oats, maize,
rice, grain sorghum, buckwheat, millet,canary seed, jawar, bajra, ragi, and other
cereals)Food Corporation of India
Cloves, cinnamon, and cassia Removed Spices Trading Corporation Limited
and National AgriculturalCooperative Marketing Federation of
India Limited
Source: WTO (1998), Trade Policy Review – India;   and Ministry of Commerce (1997), Export Import Policy, 1997-2002.
(xvii)  Balance-of-payments measures
65. Import restrictions maintained for balance-of-payments reasons under Article XVIII:B of the
GATT were removed by 1 April 2001 (section (viii)(b) above).
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Procedures
66. As in the case of imports, most exporters are required to register with the Director General of
Foreign Trade in the Ministry of Commerce, and obtain an IEC number before any exports may be
carried out.81  Licences are also required for restricted exports and exports subject to export quotas.
                                                     
80 Based on data provided in WTO document G/STR/N/7/IND, 8 October 2001.
81 Ministry of Commerce (1997), Chapter 4.WT/TPR/S/100 Trade Policy Review
Page 50
The authorities state that export licensing requirements have been continuously reduced and that the
remaining restrictions exist essentially for food safety and security reasons.
(ii) Quality control and preshipment inspection for exports
67. The Export Inspection Council (EIC) of India was established under Section 3 of the Export
(Quality Control and Inspection) Act, 1963.  Th e Act empowers the Government of India to set
minimum standards for export of certain commodities and to set up a suitable mechanism forinspection and quality control.  The EIC advises the Government on measures to be taken to enforce
quality control and inspection for exports.  Around 1,000 items were notified under the Act as subject
to compulsory quality control
82;  however, according to the authorities, as part of economic reforms
initiated in the early 1990s, this requirement was waived for specific categories of exporters (see
below).
68. Preshipment inspection and certification services for exports are provided by five export
inspection agencies (EIAs), established by the Government in 1966;  these are under the
administrative and technical control of the EIC.  The main offices of the five EIAs are in Kolkata,
Chennai, Delhi, Kochi, and Mumbai, with a network of 44 suboffices, including laboratories, located
in other industrial centres and ports.  The Government, through the EIC, also recognizes othergovernment and private sector agencies that provide preshipment inspection services for exports
based on international standards (ISO 17020/17025) as applicable.
69. The EIC offers export inspection and certification services under the following systems:
consignment wise inspection (CWI);  in-process quality control (IPQC);  or self-certification.  Any
one or more of the systems may be specified in the notification of individual commodities;  however,
items such as fish and fish products, egg products, and milk products are subject to mandatory export
certification based on Food Safety Management Systems (FSMSC).  Under CWI, each exportconsignment is inspected and tested to check conformity with established standards;  certification
takes between one day and a week depending on the product and time required for testing.  IPQC
relies on the exporter to ensure that established standards are met at each stage of production, with
random spot checks carried out by the EIC;  the self-certification scheme allows approved
manufacturers and exporters to issue certificates for their products themselves.  The FSMSC is basedon international standards of food safety management systems such as HACCP/GMP/GHP and
involves approval and surveillance of food processing units.
83
70. In order to streamline the process of approval and to make manufacturers and exporters take
greater responsibility for ensuring quality in exports, the Government has exempted from compulsory
preshipment inspection exports of products notified under the Export (Quality Control and Inspection)
Act, 1963, for Star Trading Houses, Trading Houses, Export Houses, industrial units established in the
free-trade zones, the export-processing zones, and 100% export-oriented units.  Units approved by the
EIAs under the IPQC system may also issue inspection certificates unless they request a certificate
from the EIAs.  In addition, a larger number of products, including fish, egg, and milk products have
been brought under the purview of the Export (Qua lity Control and Inspection) Act.  The EIC also
organizes seminars and training programmes to increase quality control consciousness among
manufacturers and exporters.  India also notes that in the context especially of the WTO's SPS
Agreement, import restrictions are being imposed in the food sector due to health and safety concerns.
                                                     
82 These include engineering, chemicals and allied pr oducts, food and agricultural products, jute and
jute products, coir and coir products, footwear and footwear components, cashews, fish and fishery products,eggs, etc. (Ministry of Commerce, 2001a).
83 Three such units had been approved to provide self-certification as of September 2000 (Ministry of
Commerce, 2001a).India WT/TPR/S/100
Page 51
To address these concerns, food items are being brought under mandatory export certification.  In
addition to fish and fish products, egg and milk products, it has been proposed to subject honey, live
fish, fresh poultry and poultry products, rice, and dried fish and fish maws to compulsory export
certification.  As the official export inspection and certification body, the EIC is working to develop
equivalence agreements, as envisaged under the SPS Agreement, with the official import control
bodies of its trading partners.  In this context the EIC's export certification is recognized by theEuropean Union for fish and fish products and Basmati rice and by the U.S. Food and Drugs
Administration for black pepper.
84
(iii) Export taxes
71. Since its previous Review, India has removed export taxes on all products except hides, skins,
and leathers, tanned and untanned (not including manufactures of leather).85  The export duty on these
products was raised from 15% to 60% in 2000.86  According to the authorities, the export duties are
maintained to ensure export of high value-added leather goods.  However, insofar as such taxes (or
other export restrictions) depress the domestic prices of such leather items, they constitute implicit
assistance to domestic downstream processing of such items.
(iv) Minimum export prices
72. Under its Export-Import Policy, India may impose minimum export prices.  At the time of its
previous Review, exports of stone boulders to Bang ladesh were subject to a minimum export price of
US$18 per tonne.  Since then, minimum export prices have been imposed for coir and coir products.
According to the authorities, the only entities enti tled to export onions (which are subject to export
quotas) are designated state trading enterprises;  these enterprises also issue minimum export prices
for onions.
(v) Export prohibitions and restrictions
(a) Export prohibitions
73. India maintains export prohibitions on a number of items including wild animals, exotic birds,
tallow, wood products, beef, and sandalwood products (Table III.6).  The only change, since the
previous Review has been the inclusion in the list of export prohibitions of:  manufactured articles and
shavings of shed antlers of deer;  peacock tail feathers, including handicrafts and other articles usingthem;  certain species of sea shells;  and 29 species of plants.
74. In accordance with United Nations Security Council resolutions, India prohibits exports of
some products to Iraq and Libya.
87  An embargo on trade with Fiji maintained at the time of the last
Review has been lifted.
                                                     
84 In addition, the Australian Quarantine and Insp ection Service (AQUIS) has agreed to recognize the
EIC's certification system for fish and fish products;  the EIC is also in discussion with agencies from other
countries including Japan, Canada, and Sri Lanka.
85 Notification No. 100/89-Cus., dated 1 March 1989, amended by Notification No. 133/2000-Customs,
17 October 2000.
86 Central Board of Excise and Customs, Notification No. 132/2000, 17 October 2000.
87 Exim Policy Procedures, Chapter 4.WT/TPR/S/100 Trade Policy Review
Page 52
Table III.6
Export prohibitions, 1997 and 2002
Description (status on 1 April 2002) Reason for prohibition Status on 1 April 1997
All forms of wild animals including their parts and products
except peacock tail feathers including handicrafts made
thereof subject to conditions as specified in Schedule 2,
Appendix I of the book titled "ITC (HS) Classifications of
Export and Import Items"Protection of wildlife under the Wild Life
Protection Act, 1972prohibited
Peacock tail feathers including handicrafts and articles
made thereofControl of poaching and illegal trade in
wildlife and its productsnot prohibited
Manufactured articles and shavings of shed antlers of Chital
and Sambhar subject to conditions as specified in
Schedule 2 Appendix I of the book titled "ITC(HS)
Classifications of Export and Import Items"Control of poaching and illegal trade in
wildlife and its productsnot prohibited
Exotic birdsaProtection of wildlife prohibited
All items of plants included in Appendix I and II of the
Convention on International Trade in Endangered Species
(CITES), wild orchid as well as plants as specified in
Schedule 2 Appendix 2 of the book titled "ITC(HS)
Classifications of Export and Import Items"Protection of endangered species prohibited
Beef Social and religious reasons prohibited
Human skeletons Social reasons prohibited
Tallow, fat and/or oils of any animal origin excluding fish
oilSocial and religious reasons prohibited
Wood and wood products in the form of logs, timber,
stumps roots, bark, ships, powder, flakes, dust, pulp, andcharcoal except sawn timber made exclusively out of
imported logs/timber subject to conditions as specified in
Schedule 2 Appendix I of the book titled "ITC(HS)
Classifications of Export and Import Items"Ecological and environmental reasons prohibited
Speciality chemicals, organisms, material, equipment, and
technologies, as specified in Schedule 2 Appendix 3 of the
book titled "ITC(HS) Classifications of Export and Import
Items"Strategic importance of the listed products prohibited
Sandalwood in any form but excluding:
(i) Finished handicraft products of sandalwood;(ii) Machine finished sandalwood products;  and
(iii) Sandalwood oil subject to quantitative ceilings and
conditions as notified by the Directorate General of
Foreign Trade, from time to time.Ecological and environmental reasons prohibited
Red Sanders wood in any form, whether raw processed or
unprocessed but excluding such value-added products of
Red Sanders Wood as specified and subject to the
conditions laid down in Schedule 2 Appendix 4 of the book
titled "ITC(HS) Classifications of Export and Import Items"Ecological and environmental reasons prohibited
Sea shells of the following species:
(i) Trochus niloticos(ii) Turbo species(iii) Lambis species(iv) Tridacua gigas(v) Xancus pyrusEcological and environmental reasons and
for the conservation of exhaustible natural
resourcesnot prohibited
a Except albino budgerigars, budgerigars, Bengali finches, white finches, and zebra finches, which may be exported subject to
preshipment inspection;  and java sparrows, which may be exported under licence (Notification No. 25 (RE-2000)/1997-2002,
24 July 2000).
Source: WTO (1998), Trade Policy Review – India;   and Ministry of Commerce (1997), Export-Import Policy 1997-2002 ,
and amending notifications up to September 2001.India WT/TPR/S/100
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(b) Export restrictions
75. Exports of a number of products are restricted and may be exported only if a licence is
obtained.88  The licences are issued by the Directorate General of Foreign Trade on the approval of its
Export Facilitation Committee.  The list of restricted items (Table AIII.1), includes cattle, camels,
fertilizers, cereals, groundnut oil, and pulses.
76. Export restrictions on hides and skins have been lifted, but exporters of these products are
required to register the export contracts (indicating the price, quantity etc.), with the Council for
Leather Exports or with the Marine Products Export Development Authority (MPEDA) for fish hides
and skins.89
(c) Export quotas
77. Export quotas may be notified from time to time by the Director General of Foreign Trade.
At present, it appears that export quotas are maintained for:  onions90;  whole and infant milk;  pure
milk;  butter (unless exported as branded products in  consumer packs not exceeding 5 kg.);  wheat and
wheat products;  coarse grains;  brown seaweed and agarophytes, excluding G-adulis of Tamil Nadu
coast origin in processed form;  sandalwood oil;  and cotton yarn.  Export quotas for sugar, powdered
milk, ghee, and peacock tail feathers have been removed.
(vi) Voluntary restraints and surveillance
78. India maintains restrictions on exports of textiles and clothing under the Agreement on
Textiles and Clothing.  Indian exporters' utilization of quotas in these two markets has in some
instances been low, for reasons that are unclear. One possible reason is India's high production costs.91
Another possible reason may be preferential market access accorded to other exporting countriesunder regional or bilateral trade agreements (Chapter IV(3)(ii)).
(vii) Measures maintained by importing countries
79. Exports from India are currently subject to 40 anti-dumping and 13 countervailing measures,
as notified to the WTO.
92  According to a study carried out by the Department of Commerce, several
exports face non-tariff measures in India's main markets.  The products concerned include:
agricultural products such as spices, tea, tobacco, meat and poultry, groundnuts, floriculture, cereals
and cereal products, fresh fruit, dairy products, and marine products (mainly for SPS/TBT and tariffrate quota reasons);  textiles and clothing products (anti-dumping duties);  chemical and related
products (registration requirements, quantitative restrictions, TBT, anti-dumping measures);
engineering goods such as steel wire roads, welded carbon quality line pipes, hot rolled lead and
bismuth carbon steel products, automobiles, and iron and steel (tariff rate quotas, safeguard and
countervailing duties, TBT, government procurement regulations);  electronic products (anti-dumpingmeasures);  and leather and footwear (SPS/TBT, labour standards, safeguards).
93  A more detailed
                                                     
88 Government of India, Notification No. 24 (RE-2000)/1997-2002, 14 August 2001.
89 Ministry of Commerce and Industry, Notification No. 40 (RE-00)/1997-2002, 20 September 2000.
90 Onion export quotas are also allocated to individu al state trading companies (see section (ix) below).
91 Panagariya (2002), pp. 279-284.  It follows that India may not necessarily be able to expand exports
in line with any future relaxation of quotas under the ATC.
92 Based on the WTO anti-dumping and countervailing database.
93 See Ministry of Commerce and Industry (2001).WT/TPR/S/100 Trade Policy Review
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analysis of non-tariff measures facing Indian exports of pharmaceuticals, engineering goods, leather,
marine products and mangoes was carried out in a recent study by the Commonwealth Secretariat.94
(viii) Duty and tax concessions
(a) Drawback
80. Duty drawback is available under Sections 74 and 75 of the Customs Act 1962.  Under
Section 75 of the Customs Act, 1962, drawback is permitted for imported inputs used in themanufacture of goods that are exported.  The rate of drawback is notified by the Central Government
(Ministry of Finance) annually, three months after the Budget is introduced in Parliament.  The rates
known as "all-industry rates" are calculated on the basis of broad averages of, inter alia,  consumption
of inputs, duties and taxes paid, quantity of wastage, and f.o.b. prices of export products.
95  According
to the authorities, the all-industry rates neutralize around 70-80% of the total duty paid on the inputs.If all-industry rates are unavailable or if it is felt that duty drawback provided inadequate
compensation for import duty paid on inputs, the exporter may request the establishment of "special
brand rates".
96  The special brand rates, according to the authorities, envisage duty neutralization of up
to 90-95% of total tax paid on inputs.  However, while the all-industry rates are based on average
rates of consumption of inputs and rates of duty paid, the special brand rate scheme is product andexporter specific, requiring the detailed submission of proof of duty payments by the exporter.
81. Drawback is also allowed on goods originally imported into India and exported within
two years from payment of import duty, under Section 74 of the Customs Act.  For goods exported
without being used, 98% of the import duty is refunded;  for goods exported after use, the percentage
of duty refunded varies depending on the period between import and export of the product.
97  Duty
forgone from drawback has risen from Rs 36.6 billion in 1997/98 to Rs 43.2 billion in 2000/01.
(b) Other duty and tax concessions
82. To reduce or remove the anti-export bias inherent in the system of indirect taxation and to
encourage exports, several schemes have been established allowing importers to benefit from tariff
exemptions, especially on inputs.  The schemes are meant either for specific industries or users (the
end-use scheme).  Some of these programmes provide customs duty exemptions or concessions for
inputs such as the advance licence and Export Promotion Capital Goods (EPCG) schemes, while
others provide import duty rebates on imported inputs on an ex post basis such as the Duty
Entitlement Passbook (DEPB) and Duty Free Replen ishment Certificate (DFRC) schemes.  Several
schemes are also accompanied by specific export obligation (Table III.7).  With the exception of
drawback, these schemes are generally administered by the Directorate General of Foreign Trade in
the Ministry of Commerce and Industry.  The Ministry of Finance also administers the Income Tax
                                                     
94 Commonwealth Secretariat (2001).
95 The drawback consists of the "customs allocation", which includes the basic customs duty rate and
the special additional duty, and the "central excise allocation", which includes the additional duty and the exciseduty on locally produced inputs.
96 Central Board of Excise and Customs, Duty Drawback , [Online].  Available at:  www.cbec.gov.in/
cae/customs/dbk-schdule/dbk-mainpg.htm, [20 July 2001].
97 The rates range from 85% of import duty for goods that remain in the country for up to six months,
to 30% for goods that remain in the country for between 30 and 36 months;  drawback under this provision isnot allowed for wearing apparel, tea chests, exposed cinematographic films passed by the Board of FilmCensors in India, unexposed photographic films, paper and plates and x-ray films, and for cars that have beenused for over four years. (Notification No. 19/65–Customs, 6 February 1965).India WT/TPR/S/100
Page 55
Exemption Scheme which is provided to exporters and units based in free-trade zones (section (x)
below).
83. Over the years, it appears that an increasing number of exporters have made use of these
schemes.  It is not clear whether they have been successful in boosting Indian exports.  Data provided
by the authorities show that the share of exports  qualifying for these schemes as a share of total
exports has risen steadily, from around 37% in 1997/98 to 71% in 1999/00;  but India's exports
themselves accounted for only around 8.6% and 8.2% of GDP during these two years.98  Duty forgone
as a result of these schemes also rose, from some Rs 89 billion in 1997/98 to around Rs 173 billion in
2000/01 (from around 22% of customs revenue to around 35%) although the authorities point out that
as the EPZs are duty-free enclaves, in real terms no duty is forgone.99  Instead, it has been suggested
that an increase in the exports to GDP ratio from around 5% in 1990 to 8% at present, may be duemore to liberalization policies pursued since 1991 than to the export promotion schemes
themselves.
100  A study presented recently by an advisory body to the Planning Commission argues
that the multiplicity of such export promotion schemes makes administration of the schemes difficult
and time-consuming.101
Table III.7
Drawback and other concessional imports, 2001/02
Scheme Eligibility Concessions Performance requirements
Duty drawback All exporters Refunds customs duty paid on
imports of inputs used inmanufacture of goods
subsequently exported;  based
on industry average drawbackratesn.a.
Brand rate fixation Manufacturer-exporters Provides drawback for
individual exporters on
particular brandsn.a.
End-use tariff Range of industries and other
usersConcessional rates of duty on
certain importsn.a.
Export promotion capital
goods (EPCG)Manufacturer-exporters with or
without supportingmanufacturer/vendor, merchant
exporters tied to supporting
manufacturers and serviceproviders5% duty on capital good
imports, including jigs,fixtures, dies, moulds and
spares subject to export
obligationExport obligation of five times
the c.i.f. value of capital goods(on f.o.b. basis) or four times
the c.i.f. value of capital goods
on NFE basis to be fulfilledwithin eight years from grant
of licence
a
Duty exemption schemes
- Advance licence Manufacturer-exporter and
merchant exporter0 duty on imports of inputs for
production of exportsExport obligation on the basis
of published input-output
norms
Table III.7 (cont'd)
                                                     
98 The schemes included in this data are:  ad vance licence, advance intermediate licence, special
imprest licence, DEPB, and EPCG.
99 Data on duties forgone are available for advance licence, export-processing zones, export-oriented
units, EPCG, special imprest licence, and DEPB
100 Panagariya (2000).  The paper goes on to argue that the correction of a distortion (anti-export bias in
this case) by another distortion (export promotion schemes) is not preferred to leaving the original distortion inplace as the two distortions are likely to become additive due to rent seeking and corruption, while theintroduction of the "corrective" distortion will eliminate the pressure to remove the original distortion.
101 Planning Commission (2001b).WT/TPR/S/100 Trade Policy Review
Page 56
Scheme Eligibility Concessions Performance requirements
- Advance licence for
intermediate supplyManufacturer supplying goods
to final exporter/deemed
exporter holding another
advance licence0 duty on imports of inputs
required for production of
exportsExport obligation on the basis
of published input-output
norms
- Advance licence for deemed
exportMain contractor or sub-
contractorAs above Export obligation on the basis
of published input-outputnorms
Duty remission schemes
- Duty free replenishment
certificate (DFRC)Merchant-exporter or
Manufacturer-exporter for the
import of inputs used in the
manufacturer of goodsPost-export remission of duty
(basic and special additional
duty but not additional duty
which is equal to excise duty)on imported inputs used for
manufacture of export productsDuty reimbursed as a
percentage of exports;
minimum value addition of
33% based on SION publishedinputs used for exports may be
replenished
- Duty entitlement passbook
scheme (DEPB)As above Exporter may apply for credit
on import duty as a certain
percentage of the f.o.b. value of
exports (no entitlement todrawback)Duty reimbursed as a
percentage of exports
Annual Advance Licence Manufacturer exporter with
export performance ofRs 1 crore in the preceding yearExporters meeting eligibility
requirements entitled to annualadvance licence of 200% of the
average f.o.b. value of exports
in the preceding licence yearn.a.
Deemed exports Goods manufactured in India
supplied against an Advance
Licence DFRC supplied toEOUs or units located in EPZs,
SEZs, STPs or EHTPs;  EPCG
licence holders;  to projectsfinanced by multilateral or
bilateral agenciesAdvance Licence for
intermediate supply or for
deemed export, refund ofTerminal Excise Duty and
deemed exports drawbackn.a.
Diamond, gem and jewellery
export promotion
- Replenishment licence Exporters of gems and
jewelleryDuty-free licence for import of
inputs post export at c.i.f.
between 55% and 95% of the
f.o.b. value of imported inputsto be used in specified gem
exports (Appendix 30A)Duty reimbursed as a
percentage of exports
- Gem replenishment licence Post-export imports of rough
diamonds, precious, semi-
precious and synthetic stones
and pearls, and empty jewelleryboxes.Licence valid for 18 months Duty reimbursed as a
percentage of exports
- Diamond imprest licence Importers of rough diamonds Licence valid for import of
rough diamonds equal to thebest export performance of cut
and polished diamonds during
preceding three licensing yearsor for import of cut and
polished diamonds of up to 5%
of the export performance ofthe preceding year of cut and
polished diamonds for status
holdersExport obligation of inverse
ratio of 65% of replenishmentwithin five months of
clearance of imports by
Customs
b
Table III.7 (cont'd)India WT/TPR/S/100
Page 57
Scheme Eligibility Concessions Performance requirements
- Bulk licence for rough
diamondsM/s Hindustan Diamond
Company Ltd. (HDCL),
Mumbai;  MMTC Ltd. New
Delhi;  exporters whose annualaverage f.o.b. value of export
of cut and polished diamonds
during the preceding threelicensing years has not been
less than Rs 0.75 billion;  and
any overseas company with abranch office in India whose
annual average turnover in
diamonds during the precedingthree licensing years is not less
than Rs 1.5 billionValue of licence shall not
exceed 50% of the annual
average value of export of cut
and polished diamonds madeby applicant during preceding
three licensing years;  licencee
may apply for further licencebefore expiry of bulk licence
upon providing proof of
supplying rough diamonds ofup to 75% of the value of the
previous bulk licenceObligation to supply imports
of rough diamonds to a holder
of a valid replenishment or
diamond imprest licence, anEOU or EPZ, or for export;
the sale has to be completed
within 12 months from thedate of issue of licence or
three months from date of
import whichever is later
- Schemes for gold, silver,
platinum jewelleryExporters of
gold/silver/platinum jewellery
and articles thereofEssential inputs may be
purchased from nominated
agencies (MMTC Ltd.,Handicraft and Handloom
Export Corporation, State
Trading Corporation, Projectand Equipment Corporation of
India and any agency
authorized by Reserve Bank ofIndia) at 0 duty ratesn.a.
Export oriented units
(EOUs)Units involved in manufacture,
services, trading, repair,remaking, reconditioning, re-
engineering, including making
of gold, silver, platinumjewellery and articles thereof,
and agriculture, undertaking to
export their entire productionof goods and services0 duty on imports of all goods
required for its activities(except basmati paddy/brown
rice);  imports from the
domestic tariff area (DTA)exempt from Central Excise
Duty, reimbursement of Central
Sales Tax and Central ExciseDuty on bulk tea, duty paid on
fuels or any other goods from
the DTA;  and discharge of
export performance for
supplier.  Income taxexemptions under Sections 10A
and 10B of the Income Tax ActMinimum export obligation
for a period of five yearsranging from US$0.25 million
or three times the c.i.f. value
of imported capital goods,whichever is higher, to US$3.5
million or three times the
value of imported capitalgoods, whichever is higher for
the manufacturing sector;
US$0.5 million or three times
the c.i.f. value of imported
capital goods whichever ishigher for all services except
IT enabled services;  and
US$1 million or three timesthe c.i.f. value of imported
capital goods, whichever is
higher for jewellery, tradingand all other sectors.
Minimum NFE obligations are
also in place
a
Export Processing Zones
(EPZs)As above As above As above
Agricultural Export Zones Exporters of products in the
agriculture and allied sectors.As for EPCG;  imports of
inputs including fertilizers,pesticides, insecticides and
packing material under
Advance Licence/DFRC/DEPBschemes.As for SEZs, exporters of
agricultural products may alsoobtain recognition as Export
House, Trading House, Star
Trading House and Super StarTrading House if stipulated
export and NFE performance
levels are achieved
a, c
Table III.7 (cont'd)WT/TPR/S/100 Trade Policy Review
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Scheme Eligibility Concessions Performance requirements
Special Economic Zones
(SEZs)Manufacture of goods and
rendering of services,
production, processing,
assembling, trading, repair,remaking, reconditioning,
re-engineering including
making of gold, silver andplatinum jewellery, and articles
thereof.0 duty on imports;  imports
from the DTA exempt from
Central Excise Duty,
reimbursement of Central SalesTax and Central Excise Duty
on bulk tea, duty paid on fuels
or any other goods from theDTA;  and discharge of export
performance for supplier.No minimum export
performance.  Positive NFE
requirement
a
Software technology parks Same as above As for EOUs
Electronic hardware
technology parks (EHTPs)Same as above As for EOUs
Export Houses, Trading
Houses, Star Trading
Houses, Super Star TradingHousesMerchant as well as
Manufacturer exporters;
service providers;  EOUs;  unitslocated in EPZs, including
agricultural export zones,
SEZs, Electronic HardwareTechnology Parks and Software
Technology Parks provided
they meet certain prescribedexport and foreign exchange
earnings levelsSpecial Import Licence
(abolished on 1 April 2001)A range of prescribed export
performance levels
d
n.a. Not applicable.
a NFE is defined as the f.o.b. value of exports minus the c.i.f. value of all imported inputs, capital goods, and payments made in
foreign exchange for royalties, fees, dividends, interest on external borrowings during the first five year period.
b For example, if the licence is issued for a c.i.f. value of US$65 the f.o.b. value of the export obligation shall be US$100.
c Export performance ranges from Rs 40 million average f.o.b. va lue during the preceding three licensing years and Rs 60 million
during the preceding licensing year for export houses;  Rs 200 million and Rs 300 million respectively for trading houses;Rs 1 billion and Rs 1.5 billion, respectively for star trading houses and Rs 3 billion and Rs 4.5 billion respectively for supe r star
trading houses.  Average NFE earnings during the preceding three licensing years and during the preceding licensing year range
from Rs 30 million and Rs 50 million, respectively for export houses;  Rs 150 million and Rs 250 million respectively for tradi ng
houses;  Rs 750 million to Rs 1.25 billion respectively for star trading houses;  and Rs 2.25 billion and Rs 3.75 billion
respectively for super star trading houses.
d Export performance ranges from Rs 150 million average f.o. b. value during the preceding three licensing years and
Rs 220 million during the preceding licensing year for export houses;  Rs 750 million and Rs 1.1 billion respectively for tradi ng
houses;  Rs 3.75 billion and Rs 5.6 billion respectively for star trading houses and Rs 11.25 billion and Rs 16.80 billion
respectively for super star trading houses.  Average NFE earnings during the preceding three licensing years and during thepreceding licensing year range from Rs 120 million and Rs 180 million respectively for export houses;  Rs 620 million and
Rs 900 million respectively for trading houses;  Rs 31.20 billion and Rs 45 billion respectively for star trading houses and
Rs 93.70 billion and Rs 135 billion respectively for super star trading houses.
Source: Ministry of Commerce (1997), Export Import Policy 1997-2002 .
(c) Export subsidies
84. While India provides indirect subsidies for exports, including exemptions from tax and import
duty (section (b) above), it does not provide direct subsidies for exports.
(ix) State-trading
85. According to its WTO notification, India grants export privileges to state trading companies
for certain agricultural and minor forest produce grown by large numbers of small farmers or in tribal
areas, to ensure better marketing, to provide protection from fluctuations in price, and to ensure asteady domestic supply of these products.  Other products such as kerosene and liquified petroleum
gas (LPG), which are used as domestic fuels and therefore require a steady domestic supply, must also
be exported through state trading companies.
102  There have been some changes to the list of products
                                                     
102 WTO document G/STR/N/7/IND, 8 October 2001.India WT/TPR/S/100
Page 59
whose export is subject to state-trading.  Since 1998, exports of some petroleum products, such as
aviation turbine fuel, bitumen, and high speed diesel, have been removed from the list, while iron ore
products manufactured by Kudremukh Iron Ore Company Limited have been added to the list
(Table III.8).
Table III.8
Exports subject to state-trading, 1997 and 2002
Products on 1 April 2002 Products on 1 April 1997 State-trading agency
Chrome ore lumps with Cr 2O3 not exceeding 40%
Low silica friable/fine ore with Cr 2O3 not exceeding
52% and silica exceeding 4%Same as in 2002
Same as in 2002Mineral and Metals Trading
Corporation of India Limited
(MMTC)
Low silica friable/fine chromite ore with Cr2O3
from 52-54% and silica exceeding 4%Not subject to state-trading MMTC
Gum karaya Same as in 2002 Tribal Cooperative Marketing
Federation of India Limited
(TRIFED)
Mica waste (including factory cuttings) and scrapwhich is obtained by processing mica and which
because of size and colour is considered below the
specification of processed micaMica waste (including factory cuttings)
and scrap which is obtained by
processing mica and which because of
size and colour is considered below the
specification of processed micaMMTC
Iron ore, except:
(i) of Goa origin when exported to China, Europe,
Japan, South Korea, and Chinese Taipei,
irrespective of the Fe content;
(ii) iron of Redi origin irrespective of the Fe
content;
(iii) all iron ore of Fe content up to 64%;
(iv) rejects of iron ore chips and the like generated
from the manufacturing process after using
imported raw material subject to the following
conditions:
(a) the quantity of export of such rejects shall
not be more than 10% of the imported raw
materials (i.e. pallets); and
(b) the size of the rejected pellets chips (fines)
shall be less than 6 mm.Same as in 2002 except (iv) MMTC
Iron ore concentrate prepared by beneficiations
and/or concentration of low grade iron orecontaining 40% or less of iron produced by
KudremukhNot subject to state-trading Kudremukh Iron Ore Company
Limited.
Iron ore pellets manufactured by Kudremukh IronOre Company Ltd. out of concentrates produced by
itNot subject to state-trading Kudremukh Iron Ore Company
Limited.
Manganese ores (excluding lumpy/blended
manganese ore with ore more than 46% manganese)Same as in 2002 except they were
previously subject to imports by the
MMTCManganese Ore India Limited
Mineral ores and concentrates, namely:
- Rare earths (including yttrium) ores,
concentrates and compounds thereof;
- Other minerals containing samerskite;
urraniferrous allanite;  and radium ores and
concentrates;  and
- Granular sillimanite produced by Indian Rare
Earths Limited and Kerala Minerals and Metals
LimitedSame as in 2002 Indian Rare Earths Limited and
Kerala Minerals Metals Limited
Table III.8 (cont'd)WT/TPR/S/100 Trade Policy Review
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Products on 1 April 2002 Products on 1 April 1997 State-trading agency
Not subject to state-trading All grades of bauxite, except calcined
bauxite and low grade bauxite with
alumina content Al 2O3 less than 54% of
west coast originIndian Rare Earths Limited
Niger seeds Same as in 2002 TRIFED;  the National
Agricultural CooperativeMarketing Federation of India
Limited (NAFED), National Dairy
Development Board (NDDB), theMadhya Pradesh State Cooperative
Oilseeds Growers Federation
Limited, and the Karnataka StateAgricultural Produce Processing
and Export Corporation
Onions (all varities other than Bangalore Rose and
Krishnapuram Onions)Same as in 2002 NAFED, National Cooperative
Consumers' Federation of IndiaLtd., Andhra Pradesh State Trading
Cooperation, Spices Trading
Cooperation Ltd., MaharashtraState Agriculture Marketing Board
(MSAMB) and Gujarat Agro
Industries Corporation (GAIC)
a
- Bangalore Rose Onion Karnataka State Cooperative
Marketing Federation Ltd.
- Krishnapuram Onion Andhra Pradesh Marketing
Federation
Petroleum productsb,c:
- Crude oilPetroleum products, namely:
- Aviation turbine fuel;- Bitumen (asphalt);- Crude oil;- Furnace oil- High speed diesel;- Kerosene;- Liquefied petroleum gas (LPG);- Motor spirit;- Raw petroleum coke;  and- NaphthaIndian Oil Corporation Limited
a Government of India, Ministry of Commerce, Notification No. 37 (RE-99) 1997-2000, 1 December 1999.  Exports of onions are
allowed through other state-trading agencies as notified from time to time by the Director General of Foreign Trade.
b Government of India, Ministry of Commerce, Notification No. 10 (RE-98)/1997-2002, 22 July 1998.
c Liquified petroleum gas (LPG) and kerosene were removed from the list of products subject to state-trading in the Exim Policy
2002-2007 (Ministry of Commerce (2002), Export-Import Policy 2002-2007, Schedule II – Export Policy ).
Source: WTO (1998), Trade Policy Review – India ;  Export Import Policy, 1997-2002;  WTO document G/STR/N/7/IND,
8 October 2001;  and Ministry of Commerce Notifications.
86. Since the last Review of India, exports by st ate trading companies have increased in value,
from 2.9% of merchandise exports in 1996/97 to 5.3% in 2000/01 (some Rs 105 billion), of which
petroleum products accounted for 79%.103
(x) Free-trade zones
87. India has attempted to encourage exports through the establishment of free-trade zones such
as export processing zones (EPZs), export oriented units (EOUs) and, more recently, special-
                                                     
103 Based on WTO document G/STR/N/7/IND, 8 October 2001.India WT/TPR/S/100
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economic zones (SEZs).  EPZs were first established in India in 1965.104  These free-trade zones
(except for EOUs) provide infrastruc ture facilities, including land, power, and water, at low rates, and
telecommunication facilities, as well as on-the-spot customs clearance for imports and exports.  In
addition, a wide range of incentives are provided, including exemption from payment of customs duty
on imports of raw materials, capital goods, and consumables, exemption from payment of central
excise tax on goods procured from indigenous sources, income tax deductions for new units up to2010, reimbursement of central sales tax paid on goods procured locally, and permission to sell a
share of their output in the domestic tariff ar ea (DTA) subject to the payment of duties.
105  With the
creation of the SEZs in 2001, several EPZs have been converted into SEZs (see below).  The EPZs,
SEZs and EOUs include a range of industries, such as electronics, engineering items, chemicals and
allied products, gems and jewellery, textiles and cl othing, agriculture and forest products, plastics and
rubber products.  It is estimated that around 700 units are currently in operation in the EPZs.
88. To encourage exports of agricultural products, and to improve the rural agri-based economy,
the Government established agricultural export zone s in 2001.  The agricultural export zones, which
will include production of all agricultural and allied products, will be managed by state governments.
All units established under the scheme will ha ve access to the EPCG programme, including
concessional import tariff rates of 5% for capital-good inputs.  Units set up in the zones will also be
eligible for export, trading, "star trading", and "super star" trading house status, depending on the
value of their exports.
89. The export oriented unit (EOU) scheme was first introduced in 1981 and provides essentially
the same facilities as for the EPZs, but with a wider choice for location of the units.  With the
exception of infrastructure facilities, EOUs enjoy es sentially the same incentives as EPZs and SEZs.
As of March 2001, there were an estimated 1,536 EOUs operating in India, mainly involved inexports of textiles and yarn, food processing, electronics, chemicals, plastics, granite, and
minerals/ores;  the value of exports by the EOUs has grown steadily, from Rs 102.8 billion in 1997/98
to a projected Rs 159 billion in 2000/01 (relatively unchanged at some 8% of total exports).
106  Duty
forgone has risen, from Rs 20 billion in 1997/98 to around Rs 40 billion in 2000/01, although as stated
above, the authorities maintain that as EOUs/EPZs/SEZs are duty-free enclaves under Customssupervision, no duty is forgone in real terms.
90. Although the Government has continued to set up schemes to encourage exports, there is little
evidence to suggest that they have been successful in boosting exports.  While the value of exports
from the EPZs has increased in absolute terms from some Rs 48.2 billion in 1997/98 to a projected
Rs 86 billion in 2000/01, their share of total exports has risen only slightly (from 3.7% in 1997/98 to4.2% in 1999/00)
107;  duty forgone has also risen slightly from Rs 12 billion in 1997/98 to
Rs 12.2 billion in 2000/01.  It has been suggested that sluggish exports are partly because some EPZs
have accounted for a large share of the total export earnings of the EPZs, while the share of others has
fallen;  this superior export performance may be related to infrastructural and locational advantages
provided by some of the EPZs rather than the incentives themselves.108  In addition, in light of the
Government's announcement in the 2000/01 Budget of a phased withdrawal of export incentives, it
has been suggested that incentives given to EPZs and EOUs should also be withdrawn in a similar
                                                     
104 The first export-processing zone was established at Kandla, Gujarat in 1965, followed by the Santa
Cruz Electronics export-processing zones in Santa Cruz, Maharashtra in 1974.
105 Tax holidays were increased from five to ten years in 1999.  This was changed, however, to a
deduction from profits and gains with effect from 1 April 2001.
106 Ministry of Commerce and Industry (2001a) and updates provided by the authorities.
107 Ministry of Commerce and Industry (2001a) and updates provided by the authorities.
108 Kundra and Sharan (2000).WT/TPR/S/100 Trade Policy Review
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phased manner.109  The authorities maintain that the ex emptions provided should not be termed
incentives, as they are put in place to neutralize the incidence of duties on the inputs used in the
products exported.
91. Special economic zones (SEZs) were established in the Export Import Policy announced in
2000, and may be set up for the manufacture of goods and rendering of services, assembling, trading,
repair, remaking, and reconditioning110;  they will receive more attractive incentives than those
accorded to the EPZs.  Existing EPZs may also be converted into SEZs through a notification issued
by the Ministry of Commerce and Industry.111  To date, the Kandla, Santa Cruz Electronics, Cochin,
and Surat EPZs have been converted into SEZs.112 According to the authorities, exports from SEZs
are expected to lead to a "quantum jump" in exports, for the following reasons:  the size of the SEZs,
which is expected to be significantly larger than the size of existing EPZs113;  they are expected to be
fully integrated and provide improved infrastructure;  and their single window clearance facilities.114
In the Exim policy 2002-2007, it was announced that Overseas Banking Units (OBUs) would beestablished in the SEZs (Chapter IV(4)(iv)(b).
115
92. Other schemes to encourage exports include bonded warehouses, and export, trading, and
super star trading houses.  The trading house status is granted to exporters that have achieved theprescribed export-performance level subject to th e conditions laid down in the Export Import Policy.
(xi) Performance requirements
93. A previous requirement of "dividend balancing" for 22 consumer-goods industries was
discontinued in July 2000.
116  However, balancing requirements between the actual c.i.f. value of
imports by automobile producers in India and exports of automobiles appear to be maintained.  India's
policy relating to the import of CKD/SKD kits/components was the subject of questions raised by
Japan and the United States in the Committee on Trade-Related Investment Measures.117  Following
consultations with India, the United States and the European Communities requested the
establishment of a WTO panel, alleging violations of Articles III:4 and XI:1 of GATT and of
                                                     
109 It has also been pointed out that since EOUs need  to be defined as "hundred percent export oriented
undertakings" by a Board appointed by the Central Go vernment, this requirement may be biased against
undertakings that export almost all of their output but have not been approved by the Board (PlanningCommission, 2001b).
110 Ministry of Commerce and Industry (2001b), Chapter 9-A.
111 Existing EPZs may be converted into SEZs by the Ministry of Commerce and Industry through
issue of a notification.  EPZs not wishing to convert to SEZs may either convert to EOUs or "de-bond", but mustphysically move out of the SEZs (9-A.24).
112 In addition, approval has been given for the establishment of SEZs at Positra (Gujarat) and by the
State Governments at Dronagiri in Mahrashtra, Paradeep and Gopalpur in Orissa, Kulpi and Salt Lake in WestBengal, Bhadohi (Greater Noida) and Kanpur in Uttar Pradesh, Kakinada in Andhra Pradesh, Nanguneri in
Tamil Nadu, Indore in Madhya Pradesh, and Hassan in Karnataka.
113 Some of the approved SEZs, for example, will be set up over a proposed area of between
4,500 hectares and 20,000 hectares;  this is considerably larger than the size of the current EPZs, which rangesfrom 100 to 300 acres.
114 Ministry of Commerce and Industry (2001a).
115 Ministry of Commerce and Industry (2002).
116 Ministry of Commerce and Industry, Press Note No. 7 (2000 series) , [Online].  Available at:
http://indmin.nic.in/vsindmin/policy/ changes/press7_00.htm [24 July 2001].
117 WTO documents G/TRIMS/W12, 9 April 1998 and G/TRIMS/W/13, 6 April 1998.  India's answers
to the questions raised are contained in WTO documents G/TRIMS/W/15, 30 October 1998 andG/TRIMS/W/16, 30 October 1998.India WT/TPR/S/100
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Articles 2.1 and 2.2 of the TRIMs Agreement.118  The panel found on 21 December 2001 that India
had acted inconsistently with its obligations under Articles III:4 and XI of the GATT 1994, and
recommended that the WTO Dispute Settlement Body request India to bring its measures into
conformity with its obligations under the WTO Agreements.
94. Export-performance requirements are also specified in export-promotion schemes providing
import concessions (section (viii)(b) above).
(xii) Export finance, insurance, and guarantees
(a) Export finance
95. In addition to their priority-sector lending requirements, domestic banks are required to
allocate 12% of total annual lending for exports.  Export credit may be provided either in rupees or in
one of the convertible foreign currencies.  The credit in rupees is provided at concessional rates ofinterest announced by the RBI;  these concessional rates  help to mitigate the high costs of export
finance owing to India's high real interest rates (C hapter I(1)(i)).  The credit in foreign currency is
provided at internationally competitive interest ra tes.  Exporters may borrow money in either rupees
or in foreign currency, whichever is more beneficial to them.  Under this arrangement, until
4 May 2001 banks were required to provide export credit  at rates ranging from 10-13% per annum;  as
of 5 May 2001, they have been directed by the Reserve Bank of India to charge a maximum rate of
interest of 1.5 percentage points below the prime lending rate.
119  The ceiling rate of interest on export
credit was reduced further by one percentage point across the board, effective 26 September 2001 to
31 March 2002.
(b) Export insurance and guarantees
96. The Export Credit Guarantee Corporation of India Limited (ECGC), a Government of India
public-sector undertaking under the administrative control of the Ministry of Commerce and Industry,was established in 1957 under the name of the Export Risk Insurance Corporation Limited.  It
provides insurance to exporters against the risk of non-realization of export proceeds for political or
commercial reasons and a range of guarantees for banks and other financial institutions to enable them
to extend credit facilities to exporters on a "liberal" basis.
120
(xiii) Export promotion and marketing assistance121
97. In addition to export assistance through concessional tariff measures, the Government,
primarily through the Ministry of Commerce, provides marketing development assistance to facilitate
promotion of exports of Indian products.  The India Brand Equity Fund (IBEF) Trust, which was
established in 1996, continues to assist the promotion of Indian brands and to project India as a
reliable supplier of goods and services of world class quality.  The Trust also provides medium-termsoft loans to encourage the promotion of Indian brands of products that have achieved world class
quality and performance standards.  The Department of Commerce has also established a Marketing
Development Assistance Scheme, which helps exporter s to explore overseas markets and to promote
their exports through recognized product-specific Export Promotion Councils, Commodity Boards,
                                                     
118 WTO documents WT/DS/175/4, 18 May 2000 and WT/DS/146/2, 13 October 2000.
119 Department of Banking Operations and Development (DBOD), Circular No. Dir.BC.108/13.3.00/
2000-01, Reserve Bank of India, 18 April 2001.
120 Ministry of Commerce and Industry (2001a).
121 Unless otherwise indicated, this section is based largely on Ministry of Commerce and Industry
(2001a).WT/TPR/S/100 Trade Policy Review
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and Export Development Authorities.  To supplement this scheme, the Market Access Initiative
(MAI) was launched in 2001/02 to promote potential Indian exports in selected countries by, inter
alia, supporting the collection of marketing intelligence data and helping exporters to display their
products.  The Government spent Rs 400 million and Rs 145 million under the Marketing
Development Assistance Scheme and the MAI, respectively.
98. There are also a number of agencies involved in export promotion.  The main trade promotion
agency under the Ministry is the India Trade Promotion Organization (ITPO), which organizes trade
fairs and exhibitions in India and abroad, arranges meetings between buyers and sellers, and provides
information on products and markets.  In 2000/01, the ITPO participated in 47 events abroad,
including in Europe, America, and South-East Asia.  Other institutional arrangements for promoting
exports include the Indian Institute of Foreign Trade (IIFT) and the National Centre for TradeInformation (NCTI).  The former, established in 1964, provides training to executives, and conducts
market and commodity surveys.  The NCTI was registered as a company under the Indian Companies
Act in 1995, and includes representatives from, inter alia,  the ITPO, chambers of commerce, industry
and trade, export promotion councils, and commodity boards.  It conducts market surveys and
provides information on trade opportunities abroad.  There are also a number of export promotioncouncils and product-specific commodity boards, which are involved in marketing assistance for
exporters.
(4) M
EASURES AFFECTING PRODUCTION AND TRADE
(i) Industrial policy
(a) Industrial licensing
99. Traditionally a major instrument of India's industrial policy, licensing has been used to
regulate, inter alia,  the scale, technology, and location of investment projects.  While its scope has
been reduced markedly as a result of the 1991 refo rms, industrial licensing is still required for:
industries reserved for the public sector;  industries subject to compulsory industrial licensing;
industries subject to locational restrictions;  and industries manufacturing items reserved for the small-
scale sector (see below).  In general,  the number of industries subject to industrial licencing has been
reduced since the previous Review in 1998.  The rationale for such licensing, according to theauthorities, is to regulate capacity addition and location, based on certain strategic and industrial
development considerations.  Compulsory licensing is maintained at present mainly for
environmental, safety, and strategic reasons, along w ith the need to maintain the viability and strength
of the small-scale units.
100. Three industries are currently reserved for the public sector (down from six in 1998):  defence
aircraft and warships, atomic energy, and railways.
122
101. Undertakings subject to compulsory industrial licensing are required to submit an application
to the Secretariat of Industrial Assistance (SIA) at  the Department of Industrial Policy and Promotion
of the Ministry of Commerce and Industry.  According to the Department, applications for industrial
licences are granted within six weeks.  Whether a licence is granted depends on:  the sectoral policy ofthe Ministry concerned;  recommendations made by state governments regarding location of the
particular industry;  and security considerations.  Industrial undertakings exempt from industrial
licencing need to file an Industrial Entrepreneur Memoranda (IEM) with the SIA.  A Carry-on-
Business (COB) Licence is required if an industry is put  on the list of industries subject to compulsory
industrial licensing.  A COB is also required when a small-scale unit exceeds the prescribed small-
                                                     
122 Ministry of Commerce and Industry, SIA (2001).India WT/TPR/S/100
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scale limit of investment and continues to manufacture small-scale reserved item(s).  The application
for COB licence should be submitted to the SIA.  The number of industries subject to compulsory
licensing has also been reduced;  sugar, coal and lignite, and petroleum (other than crude) and its
distillations have been liberalized as have 19 out of 22 hazardous chemicals (Table III.9).
Table III.9
Industries subject to compulsory industrial licensing in India, November 2001
Industry HS Classification
Distillation and brewing of alcoholic drinks 22.03, 22.04, 22.05, 22.06, 22.08
Cigars and cigarettes of tobacco and manufactured tobaccosubstitutes24.02
Industrial explosives, including detonating fuses, safety fuses,
gun powder, nitrocellulose, and matches36.01 to 36.06
Hazardous chemicals 281119.01, 281210.01, 292910.09
Drugs and pharmaceuticals (according to Drugs Policy) Items not classified under HS:
- Bulk drugs produced by the use of re-combinant DNA technology
and bulk drugs requiring in-vivo use of nucleic acids as the activeprinciples.
– Formulations based on use of specific cell or tissue targeted
formulations.
Electronic aerospace and defence equipment (all types) 87.10, 88.01 to 88.05, 8906.01, 93.01 to 93.07
Source : WTO (1998), Trade Policy Review – India ;  Ministry of Commerce and Industry, SIA (2001), Manual on Industrial
Policy and Procedures in India ;  and information provided by the authorities.
102. Locational restrictions apply to industries that are to be located in cities with a population of
more than a million (as per the 1991 census);  the list of locations to which these restrictions apply
was reduced to 21 cities in 1991.  These restrictions, according to the authorities, are due toenvironmental and urban area congestion considerations.  Firms must be located at least 25 km. away
from the "Standard Urban Area" limits of a city, unless they are to be located in an area designated as
an "industrial area".  Electronics, computer software, and printing (and any other industry defined as a
non-polluting industry) are exempt from such locational restriction, as are small-scale industries
(SSIs).  The location of industrial units is also regulated by local zoning and land-use regulations, aswell as by environmental regulations.  Entrepreneurs are required to obtain pollution control and
environmental clearances from the Ministry of Environment prior to setting up an enterprise.  The
Environment Protection Act 1986 lists 29 industries that require such clearance.
123  Small-scale sector
firms (i.e. with investment of less than Rs 10 mi llion) are exempt from obtaining environmental
clearance.
103. Between January 1998 and October 2001, 286 industrial licences (including nine COB
licences) were issued;  one application by an Indian company to manufacture industrial explosiveswas rejected on security grounds.  The sectors concerned were textiles, chemicals (other than
fertilizers), leather goods, transportation industry, and industrial machinery.
                                                     
123 This list includes industries such as petro-ch emical complexes, petroleum refineries, cement,
thermal power plants, bulk drugs, fertilizers, dyes, pa per, etc.  However, if investment is less than
Rs 500 million, such clearance is not necessary, unless it is for pesticides, bulk drugs and pharmaceuticals,asbestos and asbestos products, integrated paint complexes, mining projects, tourism projects of certainparameters, tarred roads in Himalayan areas, distilleries, dyes, foundries, and electroplating industries (Ministry
of Commerce and Industry, SIA (2001)).WT/TPR/S/100 Trade Policy Review
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(b) Small-scale industries
104. Small-scale industries (SSIs) are defined as firms with investment in plant and machinery of
less than Rs 10 million.  This definition was revised in 1999 to lower the investment ceiling, which
stood at Rs 30 million in 1998.124  For high-technology and export-oriented industries, such as hand
tools and knitwear, this ceiling is currently Rs 50 million.  SSIs presently manufacture 799 items (at
HS six-digit) reserved exclusively for the SSI.  However, these 799 items can also be manufacturedby medium/large-scale units, if they apply for and obtain an industrial licence.  In such cases, a
minimum export requirement of 50% must be met.
125  As shown in Table III.10, there are 28 major
industry groups in the SSI.  The number of items reserved for the SSI is reviewed regularly.  The
Minister of Finance recently announced in the Budget that over 50 items of knitwear, certain
agricultural implements, auto components, so me chemicals and drugs will be de-reserved.126
Table III.10
Items reserved for the small-scale sector
Number of items
Product1998a2001b
Food and allied industries 12 12
Textile products including hosiery 16 16
Articles of silk and man-made fibre hosieryc61 5
Wood and wood products 14 14
Paper products 30 30
Leather and leather products including footwear 18 9
Rubber products 22 21
Plastic products 15 15
Injection moulding thermo-plastic products (1)c44 42
Injection moulding thermo-plastic products (2)c77
Chemicals and chemical products laboratory chemicals and reagents 62 62
Natural essential oils 77
Organic chemicals, drugs and intermediatesc37 37
Other Chemicals and chemical products 76 76
Glass and ceramics 33
Ceramic table wares and allied items in ston e wares semi-vitreous wares and earthen waresc24 24
Mechanical engineering excluding transport equipment 201 193
Electrical machines, appliances & other apparatus including electronics electrical apparatus 47 47
Electronic equipment and componentsc99
Transport equipment boats and truck body buildingd33
Auto parts components and ancillaries and garage equipmentc47 47
Bicycle parts, tricycles & perambulators 42 42
Miscellaneous transport equipmentc44
Table III.10 (cont'd)
                                                     
124 However, the term SSI appears to have different meanings for different agencies.  The Central
Excise Department, distinguishes SSIs on the basis of the annual turnover of the units (up to a maximum limit of
Rs 30 million);  while the Small Scale Industries Board defines SSIs on the basis of investment in plant and
machinery (an upper limit of Rs 1 million).
125 Ministry of Commerce and Industry, SIA (2001).
126 Ministry of Finance (2002b).India WT/TPR/S/100
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Number of items
Product1998a2001b
Miscellaneous:  mathematical and survey instruments;  sports goods;  stationery items;
clocks & watches52 52
Othersc23 22
Total 821 799
a WTO (1998), Trade Policy Review – India ;  and changes made by the authorities.
b SID Online information "List of items reserved for exclusive manufacture in small-scale sector".  Available at:
http://www.laghu-udyog.com/ssiindia/resevex.htm.
c These classifications did not appear in the previous TPR.
d This is listed in the 1998 TPR as transport equipment;  boats and truck body parts and others.
Source : WTO (1998), Trade Policy Review – India;   and SID Online information.  Available at:  http://www.laghu-
udyog.com/ssiindia/resevex.htm [2 October 2001].
105. SSIs accounts for some 40% of manufacturing pr oduction in India and over 35% of exports.
However, according to a report of the Expert Committee on Small Enterprises (Hussain Committee),
the reservation of products for SSIs has crippled growth in several industrial sectors, and restricted
exports in many areas (including garments, toys, and leather products).  A subsequent study group on
the Development of Small Scale Enterprises, constituted by the Planning Commission, suggested in
2001 that the list of sectors reserved for the small-scale sector should be reviewed periodically in light
of changing economic conditions.  Periodic reviews of the list of items reserved for the sector take
place in consultations with stakeholders.  As a result of such reviews, 22 items (mainly readymade
garments, leather items, and toys) have been removed from the list since 1998.  The criteria forreservation include:  the nature and employment potential of articles that may be produced
economically by ancillary or small-scale industrial undertakings;  the possibility of encouraging and
diffusing entrepreneurship in industry;  the prevention of concentration of economic power;  and any
other matters considered important by the Statutory Advisory Committee, which takes decisions
regarding reservations.  SSI reservation has also been an impediment to FDI, since many industries
that could otherwise be attractive to foreign investors are not.
127  A maximum of 24% of foreign
equity may be invested in the small-scale sector through the automatic investment route.  Foreign
investment above that limit is subject to approval and a mandatory export requirement of 50% of
annual production.
106. The Government's commitment to the SSI sector has been demonstrated repeatedly through
the provision of tax relief (i.e. exemption of excise duties), and special credit lines, as well as specific
programmes aimed at improving the sector's performance (Table III.11).  Several credit schemes havebeen designed for the SSIs in order ensure a gu aranteed flow of funds, which otherwise would be
attracted to other, more lucrative, areas.  The public sector continues to extend preferences for the
purchase of items manufactured by SSIs.  The Ministry of Small-Scale Industries and Agro and Rural
Industries in its "Mission for the Millennium" stated that all new subsidies to the SSIs should be
examined for their WTO compatibility.
128
                                                     
127 IMF (2000).
128 Ministry of Small Scale Industries and Agro and Rural Industries (undated), Mission for the
Millennium  [Online].  Available at:  http//ssi.nic.in/mission20.html [11 October 2001].WT/TPR/S/100 Trade Policy Review
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Table III.11
Incentives/concessions offered to  small-scale industries (SSIs)
Incentives/concessions Description
Fiscal incentives Excise duty exemption up to Rs 10 million if total clearances sales do not exceed Rs 30 million.
Credit Priority sector lending by banks.
Allocation of funds for the SSI sector:  40% for units with investment below Rs 0.5 million;  20% for
units with investment between Rs 0.5 – Rs 2.5 million;  and 40% for all other units.
Credit at concessionary rates for rehabilitation of sick SSI units.
Credit Insurance Scheme to improve flow of investment credit to SSI units;  the scheme is implemented
by a Credit Guarantee Fund Trust.
Credit Linked Capital Subsidy Scheme to upgrade technology was launched in October 2000 providing
12% capital subsidy on projects of technology upgradation in specified products/subsectors.
Refinance and other schemes provided by the Small Industries Development Bank of India (SIDBI).Equity-type support to new/existing projects under the National Equity Fund Scheme (NEF), with project
cost of up to Rs 5 million and loans up to Rs 1 million.
Collateral-free loans by banks of up to Rs 0.5 million.
Technology Development and Modernization Fund Scheme, operated by the SIDBI, provides for loans at
the prime lending rate (PLR);  and refinancing at 2% below the prime lending rate (PLR).
Prime Minister's Rozgar Yojana provides funding for micro enterprises.
Others Reservation of products for SSI ( 799 items at present).
Non-mandatory government purchase (356 items) and price preferences (up to 15%).
The Integrated Infrastructure Development Scheme to strengthen infrastructural facilities;  the scheme is
to progressively cover all areas in the country with a 50% reservation for rural areas.
Infrastructural support to Entrepreneurship Development Institutes set up for training.Marketing Development Assistance (MDA) Scheme to provide financial assistance to SSI associations
for participating in international fairs, collection of information on marketing and exports, conductingsurveys for filing anti-dumping cases etc., programmes on quality awareness, pollution control and
Vendor Development Programme.
Reimbursement of expenses incurred on acquiring ISO 9000 certification of up to 75% of the cost or a
maximum of Rs 75,000, whichever is less.
Cluster Development Programme in collaboration with UNIDO Integration Technology Upgradation and
Management Programme (UPTECH) to help modernize the clusters.
Reimbursement of expenses incurred in acquiring EAN/UCC Registration for bar coding up to 75% of
the cost or Rs 11,250, whichever is less.
Source : Ministry of Finance (2001), Union Budget 2001-2002, Budget Speech - Part A [Online].  Available
at:  http//indiabudget.nic.in/ub2001-02/bs/speech.htm[9 October 2001];  Ministry of Small Scale I ndustries and
Agro and Rural Industries, Modernisation and Technology Upgradation  [Online].  Available at:
http://ssi.nic.in/schtinymod.html [11 October 2001];  Ministry of Small Scale I ndustries and Agro and Rural
Industries, Annual Report 1999-2000  [Online].  Available at:  http://ssi.nic.in/ar1999-2000.html [30 July 2001];
and SSI Policy 2000, Incentives  [Online].  Available at:  http://www.bisnetworld.net/timeis/cgovt/
ssiPolicy2000a.html [02.10.2001].
107. "Sickness" in the SSI sector is a concern.  Industrial sickness has been caused by, inter alia ,
lack of planning, management deficiencies, inefficient financial controls, and infrastructuralconstraints.  The Reserve Bank of India has issued detailed guidelines for the rehabilitation of "sick"
SSI units.  These guidelines include the provision of  concessions such as:  loans for working capital at
1.5% below the prevailing fixed/prime lending rate (PLR);  funded interest term loans free of
interest
129;  term loan at a concessionary rate of 2% below the document rate (interest rated agreed to
                                                     
129 Funded interest term loans are defined as the unpaid interest on term loans (loans restricted to a
certain period of time) and cash credit during a period when the SSI incurred continuous cash losses;  no interestis charged on the funded loan and the loan is to  be repaid within a period not exceeding three years.India WT/TPR/S/100
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and indicated in the document laying out the terms and conditions of the loan);  and contingency/loan
assistance at concessional rates for working capital.130
(c) Exit policies
108. India does not seem to have a bankruptcy law;  thus the revival and reconstruction of sick
industrial companies is dealt with by the Sick Industrial Companies (Special Provisions) Act, 1985
(SICA) and its amendments.  This Act was enacted to detect sick and potentially sick companies andto ensure the adoption of remedies and measures needed to revive and rehabilitate such companies.
However, the SICA has itself become a barrier to restructuring because the procedures stipulated in
the Act have led to endemic delays.  Moreover, the Board for Industrial and Financial Reconstruction
(BIFR), a quasi-judicial body established in 1987 to implement the SICA, which is res ponsible for
rehabilitating or winding up companies, is widely criticized for delaying resolutions, and not beingable to provide viable schemes for the revival of sick companies in a reasonable short time frame.
131
Thus, the Government constituted a high level committee on law for the revival, reconstruction and/orwinding up of sick companies.  The Committee's report proposes to, inter alia , repeal the SICA, and
to amend the Companies Act in order to set up a National Company Law Tribunal, which would be
entrusted with the powers and jurisdictions presently exercised by the Company Law Board, theBIFR, the Appellate Authority of Industrial and Financial Reconstruction (AAIFR), and the High
Courts.  The Government has accepted the Committee's key recommendations, which will be
introduced in Parliament during the current session.
132
109. Under the SICA, a company has to be referred to the BIFR, "if its accumulated losses at the end
of any financial year resulted in an erosion of  50% or more of its maximum net worth during the
four preceding financial years".133  By end December 2000, the BIFR had received 4,575 referrals of
sick industrial units, of which 3,296 were registered.  Of the latter, 7.5% were judged "non-sick", revival
schemes were approved for 16.9%, and 25% were recommended to the High Courts for closure.134  A
total of 175 registered referrals involved public-sect or enterprises (PSEs) of which rehabilitation and
closure was recommended for 25.7% a nd 20%, respectivel y (Table III.12).
                                                     
130 Where contingency loan assistance is defined as  the financial assistance extended to units under
rehabilitation in order to meet escalations in expenditure in capital to be incurred under the rehabilitation
programme, such assistance can be provided up to a maximum of 15% of the estimated cost of rehabilitation and
concessional rates of interest may be offered.  Ministry  of Small Scale Industries and Agro and Rural Industries
(2000).
131 Report of the High Level Committee on Law relating to Insolvency of Companies [Online].
Available at:  http://www.nic.in/dca/comp/insolv-comp.html [17.10.2000].
132 Ministry of Finance (2001c);  Ministry of Law, Justice, and Company Affairs, Department of
Company Affairs (undated).
133 The Sick Industrial Companies Act, 1985, as amended in 1994, Chapter IV, Art 23.
134 According to the SICA revival schemes refer to:  the financial reconstruction of the sick industry,
the proper management or take over of the industry, the amalgamation of the industry,  the sale or lease of partor the whole of the industry, etc. (The Sick Industrial Companies Act, 1985, Art 18).WT/TPR/S/100 Trade Policy Review
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Table III.12
Status of sick industry referred to the BIFR (Board for Industrial and Financial Reconstruction)
Total Private sector Public sector
References received 4,575 4,324 251
References registered 3,296 3,121 175
Dismissed as "non-maintainable" 688 657 31
Rehabilitation schemes approved/sanctioned 557 512 45
Declared "no longer sick" out of above 249 241 8
Winding up recommended to the concerned High Court 824 789 35
Net worth became positive during enquiry 35 32 3
Cases dealt with 2,104 1,990 114
Pending cases 1,192 1,131 61
Source : Ministry of Finance (2001a), Economic Survey 2000-2001 , New Delhi.
(d) Corporate governance
110. An efficient capital market capable of mobilizing savings and channelling them into the most
productive uses is essential for successful economic restructuring and long-term development.  In this
regard, corporate governance is important.  A lack, or weakness, of such governance can constitute a
major impediment to the establishment of an efficient capital market;  studies show a positivecorrelation between the quality of corporate governance and share prices in the local market
135, which
are, in turn, a key determinant of companies' co st of capital.  Moreover, inadequate corporate
governance could jeopardize other reforms, notably privatization and corporate and financial
restructuring.
111. The Companies Act 1956, provides the basic framework for corporate governance in India.
Until recently, the Act had proved to be inadequate in ensuring high standards of corporate
governance for companies, particularly with regard to transparency and respect of shareholders'
rights.136  Hence, the corporate sector had been characterized by an increasing number of "vanishing"
companies, mismanagement, widespread shareholder dissatisfaction, and unethical business
practices.137 The last decade also witnessed the unearthing of several scams including recent
price-rigging and other scandals in India's equities markets.138  Consequently, the Government has
taken several steps to improve corporate governance; these include major amendments in 1999 and2000 to the Companies Act.  Further amendments are envisaged in 2002.
112. A Task Force was set up in May 2000 by the Department of Company Affairs (in the Ministry
of Law, Justice, and Company Affairs), which is responsible for administering the Companies Act, to
explore, inter alia, ways of improving corporate governance; the Group's Report was issued in
November 2000.
139  Upon the recommendation of the Task Force, in October 2001 the Government
                                                     
135 See, for example, Gompers, Ishii and Metrick (2001), p. 29.
136 See KAR (2001), p. 273.
137 Ministry of Law, Justice, and Company Affairs (2000).
138 In April 2001, for example, the SEBI decided to ban three companies bidding for privatized assets
from access to Indian capital markets;  the bans, which were the penalty for share-price rigging, raised doubts
about the privatization process.   At around the same time, the SEBI suspended three stock-broking firms fortheir alleged manipulation of the stock market.  (See "Stock market scandal hits India's plans to privatize"Financial Times , 24 April 2001;  and The Economist , 28 April 2001, "India's stockmarkets:  Getting tough".
139 Ministry of Law, Justice, and Company Affairs (2000).India WT/TPR/S/100
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announced its intention to set up an independent and autonomous body, the Centre for Corporate
Excellence, to improve corporate governance standards in India.140
113. The Ministry of Finance and the Securities Exchange Board of India (SEBI) have also taken
steps to remedy poor governance.  The SEBI appointed a Committee on Corporate Governance in
May 1999 to draw up a code of corporate governance, drawing extensively on international
experience.141  Responding to the recommendations arising out of the Report, the SEBI issued, in
February 2000, directions to stock exchanges in India to amend their listing requirements.  Some of
the requirements to be introduced in a phased manner include:  not less than 50% of the Board of
Directors of a company consisting of non-executive directors;  the annual reports of companies to
have a separate section on corporate governance which would include details of the remuneration of
directors of the company;  and Board procedures including the frequency of Board meetings.  Inaddition, a qualified and independent audit committee is to be set up, which will meet at least three
times a year.  The Reserve Bank of India has also appointed a Committee to report on governance
requirements specific to banks and financial institutions.  In an effort to promote corporate
governance further, the Government instituted an  annual Natural Award for Excellence in Corporate
Governance in the 1999/2000 Budget.
114. Among the professions, the Institute of Chartered Accountants of India is the regulator of
public auditors, and has issued a number of accounting and auditing standards.  The constitution of an
independent National Advisory Committee on Accounting Standards has been included in the
amending Act of 1999.
142
115. Usually corporate governance measures are imposed by self discipline and market forces,
rather than by legislation and regulation.  In India, self-regulation has been somewhat lacking  in the
area of corporate governance, although industry associations such as the Confederation of IndianIndustry (CII) have come up with guidelines for their member companies in the area of governance.
In 1998/99 the CII published a Desirable Code of Corporate Governance and some companies have
already complied with the code.
143  Some private companies have already significantly improved their
governance;  indeed, several, mostly in the technology sector, are not only globally competitive, but
maintain standards of governance that are world class.144  Furthermore, investor associations have
become more active.  The Task Force is nonetheless convinced that the level of non-legislative and
non-regulatory intervention is a function of the maturity of the market and the economy.  Thus, until
acceptable levels of such maturity and market influence are reached, it may be necessary for the
Government to support self discipline and self-regulation with appropriate legislative and regulatory
support with a provision for review after three years.145
                                                     
140 Ministry of Law, Justice, and Company Affairs (2000).
141 Most of the recommendations made by the Committee are mandatory for listed companies.
Additional non-mandatory recommendations have also been made by the Committee.  It has also beenrecommended that the SEBI writes to the appropria te regulatory bodies and governmental authorities to
incorporate the recommendations in their respective regu latory framework (SEBI (undated), "The Draft Report
of the Committee Appointed by the SEBI on Corporate Governance under the Chairmanship of Shri KumarMangalam Birla" [Online].  Available at:  http://www.sebi.gov.in/report/corpgovern.html [25 October 2001].
142 Ministry of Law, Justice, and Company Affairs (2000).
143 Ministry of Law, Justice, and Company Affairs (2000);  and SEBI (undated), "The Draft Report of
the Committee Appointed by the SEBI on Corporate Governance under the Chairmanship of Shri Kumar
Mangalam Birla" [Online].  Available at:  http://www.sebi.gov.in/report/ corpgovern.html [25 October 2001].
144 For example, a major financial institution in need of re-capitalization in order to write off bad debts,
became the first Indian lender to r econcile its accounts to U.S. Gaap in March 1999.  Subsequently, after a full
audit, it raised US$315 million of equity in New York.
145  Ministry of Law, Justice, and Company Affairs (2000).WT/TPR/S/100 Trade Policy Review
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(ii) Tax measures and other incentives/subsidies
(a) Taxation and tax measures
116. The Central Government has been making effort s to bring about far-reaching reforms of the
direct and indirect tax structures as well as their administration.  India's tax system has long been an
important instrument of economic policy rather than a mere source of revenue.  Although tax rates
have often been high, they have not yielded a great deal of revenue because the tax bases tended to benarrow owing to numerous incentives and exemptions, including tax holidays.  These measures are in
addition to the export assistance described above and direct subsidies discussed in the next section.
The tax system has thus constituted a major impediment to the efficient allocation of resources.  The
complexity of tax laws has allowed tax (as well as customs) officials considerable discretion in
interpreting them, giving rise to problems of corruption.
146  A related problem has been the tax
system's lack of transparency.  However, several measures have been introduced in recent Budgets to
broaden the tax base, reduce tax rates and simplify the tax system, especially in the case of
commodity taxation.
Indirect taxation
117. Indirect taxes are levied by both central and state governments; they currently account for
over 60% of total gross taxes collected (Table III.13).  They include a multiplicity of excises as well
as a service tax at the central level and various sales taxes at the state level.  The structure of these
taxes, at both levels of government, has been very complex and therefore difficult to administer, and,
until recently, there were wide differences in tax bases and rates between states.
Table III.13
Composition of Centre's gross tax revenues, 1992-03
(Rs billion and per cent)
Accounts Revised Budget
1992/93 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03
Gross tax revenue (Rs
billion)746.4 1,112.2 1,287.6 1,392.2 1,438.0 1,717.5 1,983.2 1,966.9 2,358.0
(Per cent of gross tax revenue)
Corporation tax 11.9 14.8 14.4 14.4 17.1 17.9 19.5 19.9 20.6
Taxes on income other thancorporation tax 10.6 14.0 14.2 12.3 14.1 14.9 17.8 17.5 18.0
Interest tax 1.0 1.1 1.3 0.9 0.9 0.7 0.2 .. ..
Other taxes on income andexpenditure 0.2 0.2 0.2 7.1 0.3 0.2 0.2 0.2 0.1
Customs 31.9 32.1 33.3 28.9 28.3 28.2 25.1 21.9 19.2
Union excise duties 41.3 36.1 35.0 34.5 37.0 36.0 35.6 37.9 38.8
Service tax .. 0.8 0.8 1.1 1.4 1.2 1.1 1.8 2.6
Estate duty 0.0 0.0 .. .. .. 0.0 .. .. ..
Wealth tax 0.6 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Gift tax 0.0 0.0 0.0 0.0 0.0 0.0 .. .. ..
Other taxes and duties 0.5 0.5 0.5 0.6 0.7 0.6 0.4 0.5 0.4
Taxes of Union Territories 2.0 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2
Table III.13 (cont'd)
                                                     
146 Planning Commission (2001b), p. 80.India WT/TPR/S/100
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Accounts Revised Budget
1992/93 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03
Less states' sharea27.5 26.3 27.2 31.3 27.2 25.3 26.4 26.9 26.0
Income tax 8.1 10.1 10.5 9.7 10.1 9.6 .. .. ..
VDIS .. .. .. 5.5 .. .. .. .. ..
Union excise duties 19.4 16.2 16.7 16.1 17.2 15.7 .. .. ..
Less assignments of UT
(i) Taxes to local bodies 1 . 0. .. .. .. .. .. . . . . .
(ii) Surcharge for financing
NCCFb.. .. .. .. .. .. .. 0.8 0.7
Net Centre's tax revenue 72.4 73.7 72.8 68.7 72.8 74.7 72.8 72.4 73.4
.. Not available.
a The taxes and duties referred to on the Union list are now distributed in the manner laid down by the Constitution (Eighteenth
Amendment) Act, 2000 read along with the recommendations of the Eleventh Finance Commission.
b National Calamity Contingency Fund (NCCF).
Source: Data provided by the Indian authorities.
Central taxes
118. Central taxes are levied mainly on domestically manufactured goods, thereby favouring
services;  this constitutes a potentially important distortion to the domestic allocation of resources.Their bias in favour of imported manufactures, necessitates additional duties levied by the Central
Government on imports (section (2)(vii)). Exemptions and other forms of relief are used to mitigate
the adverse effects of these taxes on exports.  The Minister of Finance has the discretion to make ad
hoc changes in excise tax rates.
147
119. However, India is moving gradually towards replacing excise duties with a full-fledged value-
added tax (VAT) on manufactured goods.  Accordingly, both the number and level of rates have been
reduced during the past ten years so that the current central excise rate (referred to as CENVAT) is
now 16% and a credit/offset is, in general, given for tax paid on inputs in order to eliminate tax
cascading ("tax on tax").148  While the vast majority of goods are now taxed at the single CENVAT
rate of 16%, some eight items are subject to a supplementary special excise duty rate of  16%.149
Rates on items that were previously exempt from the tax currently attract lower rates of 4% and 8%,
with a view to raising them eventually to the CE NVAT rate.  This convergence of tax rates and the
accompanying curtailment of exemptions have reduced  the distortions arising from excise taxes and
simplified tax administration (thereby making the tax system less susceptible to evasion).150
                                                     
147 Planning Commission (2001b), p.151.
148 Until recently, the cascading ("tax on tax") nature such excises was such that they tended to favour
imports of goods and discourage exports; the credit for taxes paid on capital inputs, for example, had been
staggered over two years.  This cascading effect has largely been removed, however, as a full credit/offset isnow allowed for taxes paid on most inputs.
149 In the 2002/03 Budget, for example, it was announced that with the exception of eight items subject
to special excise duty (polyester filament yarn, motor cars, multi-utility vehicles, tyres for replacement, aeratedsoft drinks and soft drink concentrates, air conditioners, pan masala , and chewing tobacco and miscellaneous
tobacco preparations), all other prod ucts subject to excise duty would face rates of 16%;  rates for products
currently at zero, would gradually be increased to 16% (Ministry of Finance, 2002b, Part B,paragraphs 106-108).
150 The formulation of exemptions has tended to be extremely complex.  Of the standard publication of
tariffs of 720 pages, 220 pages were devoted to exemptions.  There were, for example, 20 exemptions forWT/TPR/S/100 Trade Policy Review
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120. In an attempt to broaden further the indirect tax base, a tax on services was introduced in
1994 (under Chapter V of the Finance Act, 1994).  While the tax base initially covered only telephone
bills, general insurance, and stock-broking fees, coverage has been greatly expanded.151  Currently,
41 services are subject to tax;  following proposal s in the 2002/03 Budget, an additional ten services
are to be added.152  The tax rate is 5%, although there are exemptions.  No tax credit for inputs is
allowed, however, which can result in tax cascading. There is also the central sales tax (CST) of 4%on inter-state commodity sales; power to administer the tax was delegated by the Central Government
to the states, which are allowed to retain the revenues.  In addition, the Miscellaneous Cess Act
provides for the collection of Cess on manufactured products (including tea, cotton, sugar, paper, and
automobiles) at rates ranging from 0.3% to 3.5% of the value of goods.
153
121. Replacement of the central excise, the service tax and other taxes with a broad-based value-
added tax on goods and services, with few, if any, exemptions, would greatly facilitate tax
administration.  Moreover, if it were to exempt exports, it would not distort trade either. The
CENVAT could evolve into a national VAT.154
State sales taxes
122. State sales taxes range from 2% to 20%, although most are between 7% and 16%. The tax
incentives offered by states to attract investment, in the form of exemptions, waivers, deferrals and
refunds, have eroded state tax revenues.  These could be increased by strengthening tax administration
and enforcement.
123. In a landmark decision reached in November  1999, state governments agreed to harmonize
their sales tax structures.  Part of this agreement came into effect in January 2000.  In order to curtail
tax competition between states, it established uniform floor rates applicable to a uniform set of goods.
Furthermore, states undertook to grant no new incentives and to phase out existing ones gradually.They also agreed to prepare for the introduction of a uniform VAT at the state level by 1 April 2001,
with technical assistance from the Central Go vernment. The introduction of the VAT was later
postponed to 1 April 2002 (except for the special category states and newly formed States, which may
convert by 1 April 2003) and most recently to 1 April 2003.  The conversion to the VAT appears to be
complicated further because the sales tax is subject to state jurisdiction, and the Central Government'srole is more that of coordinator and facilitator of the conversion.  The postponement appears mainly to
be due to a delay in drafting legislation and in preparing the administrative framework in the states to
allow for a smooth switchover to the VAT.
124. Other important state taxes include:  excises on wine and liquor;  a 1.5% turnover tax on
traders whose turnover exceeds a certain amount; registration fees; stamp duties;  motor vehicles tax(MVT), and passengers and goods tax (PGT); and profession tax and entertainment duty in a few
                                                                                                                                                                    
exports, 90 for textiles and 5 for small-scale industry (SSI).  Each exemption had many entries, conditions and
lists, with hundreds of items on each list (Planning Commission, 2001b, p. 15).
151 "An Overview of Service Tax in India".  Available online at:
http://www.servicetax.gov.in/servicetax/overview1.htm.
152 Ministry of Finance (2002b).
153 Central Board of Excise and Customs online information.  Available at:
http://www.cbec.gov.in/cae/ excise/cx-tariff/cess-sch.htm, [15 August 2001].
154 Ministry of Finance (2001a), p. 28.India WT/TPR/S/100
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states.155  The Empowered Committee of State Finance Ministers, which is monitoring sales tax
reforms in India, has recommended that some of these be merged into the proposed state VAT.156
Direct taxation
125. The direct tax system has a very high rate structure in combination with numerous incentives
that greatly erode the tax base.  Corporate and personal income taxes, respectively, currently account
for around 20% and 18% of total gross taxes collected (Table III.13).  The top personal tax rate is30% and the statutory rate of corporate tax is 35%.
157
126. While tax rates have come down, India's statutory corporate tax rate in particular is still high
relative to many of its South-East Asian neighbours.158  However, generous tax incentives including
full or partial exemptions, accelerated depreciation, and tax holidays have ensured that corporations
undertaking eligible investments can pay considerably less than this rate.159  There are some 200 or so
incentives/exemptions in the income tax statute.160  The authorities maintain that all tax incentives
apply to domestic and foreign-owned companies alike.  They have also rendered the tax system
vulnerable to tax avoidance and tax evasion.  As a result, the effective rate of corporate tax has been
only around 21%.161  In order to address these problems, the Central Government levies a minimum
alternative tax (MAT) of 7.5% on companies' book profits, thereby imparting an additional element ofcomplexity to the tax system, which entails additiona l costs to tax administrators and taxpayers alike,
and greater uncertainty over tax assessment.
162  Such uncertainty can deter the investment that the
incentives were intended to stimulate.163
127. The authorities responsible for income taxation are apparently undergoing major
restructuring.  This involves, inter alia,  upgrading skills of officials with a view to their providing
better service to taxpayers and improving compliance.
                                                     
155 In addition, some municipalities levy an "octroi" on goods transferred into the municipality.
156 Planning Commission (2001b), p. 224.  There would also be some merit in greater harmonization as
well as broadening of the bases of the CENVAT and state VATs.
157 An additional 5% surcharge is currently levied on the income tax of resident companies, so that the
full rate of corporate tax is 36.75%.  (Previously, there was also a 10% surcharge on corporate income taxes (as
well on personal income taxes paid by high-income individuals), but this surcharge was removed by the 2000/01Budget; subsequently, a 2% surcharge was introduced, but this too was abolished by the 2002/2003 Budget.)  As
a consequence of the 2002/2003 Budget, the tax rate on branches of foreign companies was reduced from 48%
to 40%; this rate applies to branches of foreign companies, but not to those of domestic companies.  Nosurcharge is levied on foreign companies or their branches, however.
158 Corporate tax rates are currently 15% in Hong Kong, China, 26% in Singapore, and 28% in
Malaysia.
159 The personal income tax base also contains many forms of tax relief, often aimed at encouraging
saving in specified assets.
160 These include:  incentives for investment in financial assets; incentives for encouraging external
borrowing; exemption/concessional treatment of perquisite s; incentives for industrial development; incentives
for regional development; incentives for non-profit organizations; incentives for social sector;  exemption forincome of Funds; and other incentives.  A full list and description of these tax measures is found inAppendix 4.1 of idem, pp. 125-145.
161 Planning Commission (2001b), p.11.
162 See Ernst & Young International Ltd (2001), for computation of back projet for MAT purpose.
163 Planning Commission (2001b).WT/TPR/S/100 Trade Policy Review
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(b) Other incentives/subsidies164
128. Subsidies continue to be an important policy inst rument in India.  The Budget, in its non-plan
expenditure165, estimates expenditures on explicit subsidies of 1.2% of GDP for 2001/02.166  T h e
"Demands for Grants" of the various Ministries under Plan expenditure167 also show some subsidies,
but these are difficult to find and in most instances the outlays are not clear (Table III.14).168  I n
addition, there are "implicit" subsidies (e.g. interest or credit subsidies, tax relief, equity subsidies,etc.), which are not accounted for in the Budget but are used extensively
169;  These are, by their
nature, difficult to monitor170;  the authorities estimate that they accounted for some 0.08% of GDP in
2001/02.  Subsidies granted at the state level are also important, but detailed information is difficult to
obtain.  For instance, the State Electricity Boards (SEB s) charge high rates to industrial users in order
to subsidize rates in the agricultural sector;  this cross-subsidy accounted for 1.1% of GDP in 1992/93increasing to 1.7% of GDP in 1999/00.
171  The subsidy for selected oil products (i.e. kerosene and
LPG), provided through the Administered Pri ce Mechanism (APM), is also extrabudgetary
(sections (2)(xiii) and (4)(iv)(b)).172
Table III.14
Explicit (plan) subsidies (Budget 2001-2002)
(Rs million)
Ministry Subsidy Total planned expenditure
(Budget 2001-2002)
Ministry of Agriculture - Department
of Agriculture and Cooperation
Horticulture Development Programme Provision has also being made for capital investment
subsidy for Cold Storage.650.00
Lump-sum provision for
projects/schemes for the benefit of North
East Region and SikkimSubsidy for the transportation of seeds 10.00
Ministry of Comm erce and I ndustry –
Department of Industrial Policy and
Promotion
Development of Backward Areas Investment Subsidy. 40.20
Transport Subsidy to Industrial Units. 900.00
Growth Centres. 400.00
Table III.14 (cont'd)
                                                     
164 The term "subsidy" in this section is used as in  India's Budget and other official documents, and not
in the sense of the WTO Agreement on Subsidies and Countervailing Measures.  This section does not cover
any export assistance, which is covered in section (3)(iii).  The list of subsidies mentioned in the section is non-exhaustive.
165 Non-plan expenditures are those that are not included in the Five–Year Plans.
166 Secretariats' own calculation based on Ministry of Finance (2001c), Vol. I.
167 Plan expenditures are jointly determined by the Planning Commission, Ministry of Finance, central
government spending ministries, and – where relevant – state governments.  These consist mainly of outlays for
development projects, and have both capital and current expenditures components.
168 Ministry of Finance (2001c), Vol. I.
169 CAG (undated) "Management of Subsidies" [Online].  Available at:
http://www.cagindia.org/reports/civil/2000_book1/chapter6.htm [25 July 2001].
170 In its annual report the Comptroller and Auditor General (CAG) analyses several implicit subsidies
(CAG (undated) "Report of the CAG on the Union Government for the year ended March 2000" [Online].
Available at:  http://www.cagindia.org/repor ts/civil/ 2001_book1/index.htm [25 October 2001]).
171 IMF (2001).
172 This subsidy is expected to be placed on the budget once the Administered Price Mechanism is
phased out in April 2002 (see section (iv) (b) below).India WT/TPR/S/100
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Ministry Subsidy Total planned expenditure
(Budget 2001-2002)
Capital Investment Subsidy for North-Eastern Region. 50.00
Central Interest Subsidy Scheme:  provides for a subsidy
at 3% on working capital loans for a period of ten years to
new industrial units in the North Eastern Region after the
unit goes into commercial production.20.00
Comprehensive Insurance Scheme for North East:
provides for comprehensive insurance for the new
industrial units set up in the North Eastern Region after24 December 1997, including Fire Policy "C" (as per All
India Fire Tariff).  Full premium under the Scheme for a
period of ten years would be borne by the Government ofIndia on a reimbursement basis through General Insurance
Corporation Ltd.2.20
Ministry of Non-Conventional Energy
Sources
Solar Energy Programme Subsidy is provided on solar lanterns, home lighting
systems, street lights and solar pumps.677.50
Other Sources of Energy Financial support is provided for feasibility studies,
detailed preparation for project reports and towards
interest subsidy for the installation of these projects.2,715.00
Ministry of Power Interest Subsidy to Power Finance Corporation:  provides
assistance to power utilities at concessional lending rates
through the interest subsidy given by Central Government
for modernization and renovation of existing thermal
power stations and life extension of power stations.3,500.00
Ministry of Rural Development
Swaranjayanti Gram Swarozgar Yojana Subsidy to District Rural Development Agencies:
financial assistance through subsidized bank credit and
marketing support, etc.77,450.00
Rural Housing:  the Credit-cum-subsidy Scheme initiated
with effect from 1 April 1999 is now in operation and
intends to provide funds for construction of houses to
rural households having an annual income of not more
than Rs 32,000.  Subsidy up to Rs 10,000 and loan up to
Rs 40,000 is provided to eligible household.5,067.00
Ministry of Small Scale Industries and
Agro and Rural IndustriesSmall-Scale Industries Schemes:  credit linked subsidy for
technology upgradation of SMEs.5.00
Interest Subsidies Scheme:  The Khadi & Village
Industries Commission provides subsidised loans at rate
of 4% to the Khadi and Polyvastra industries registeredwith KVIC/KVIBs for their capital investment and
working capital.  They provide the difference between the
Bank PLR and 4% as an Interest Subsidy to the Banks.Under this scheme, KVIC makes an assessment of the
requirement of funds of the institution and issues Interest
Subsidy Eligibility Certificate (ISEC) to that extent.Banking institutions make available credit to that
institution based on the ISEC.190.00
Village Industries:  margin money is provided under the
Rural Employment Generation Programme (REGP).  Thesubsidy consists of 25% of the project's cost for projects
of up to Rs 1 million, and for projects of Rs 1-2.5 million
the subsidy is Rs 250,000 plus 10% of the project's costs.50.00
Ministry of Shipping Subsidy to Shipping Corporation of India:  the Shipping
Corporation of India runs passenger services between
mainland and Andaman Nicobar Islands and mainland and
Lakshadweep Islands.  The subsidy is provided to meet
the operational losses for running these services...
Table III.14 (cont'd)WT/TPR/S/100 Trade Policy Review
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Ministry Subsidy Total planned expenditure
(Budget 2001-2002)
Other programmes:  grants to develop ship ancillaryservices, National Ship Design and Research Centre,
research and development schemes for ship-building, and
subsidy to sailing vessel industry.2.00
Ministry of Tourism and Culture Other programmes:  The provision is for payment of
interest differential subsidy to specific financial
institutions on the loans to finance construction of one,
two and three star hotels projects.90.00
Ministry of Water Resources Command Area Development:  grants are given to
subsidize loans to small and marginal farmers on the
IRDP pattern for land levelling and shaping, sprinklers
and drip irrigation...
.. Not available.
Source: Ministry of Finance (2001c),  Budget  2001/2002.
129. Expenditure in explicit (non-plan) subsidies has increased substantially (by 24%) since
1997/98, with expenditure in major and other subsidies increasing almost at the same rate (also by
some 24%) (Table III.15).173  Food and fertilizer (including concessional sales of fertilizers) subsidies
continue to be the most important (accounting for 45.9% and 47.6% of total subsidies outlay,
respectively).174
Table III.15
Explicit (non-plan) subsidies, 1997/98 and 2001/02
(US$ million and per cent)
1997/98a2001/02b Growth rate
(%)
Total subsidies 5,285.6 6,565.2 24.2
Major subsidies 4,941.7 6,134.3 24.1
Food subsidy 2,125.7 3,012.6 41.7
Fertilizer (indigenous and imported) 1,998.1 1,862.9 -6.8
Concessional sales of fertilizers to farmers 699.6 1,258.8 79.9
Export promotion and market development 118.4  n.a. -
Other subsidies 322.9 399.4 23.7
Price support for copra through NAFED 0.3 5.5 2,054.6
Payments to state governments in lieu of sales tax on aviation fuel sold to
international airlines (including Air India)0.0 n.a. -
Subsidy for operations of charter flights for Haj pilgrims 20.6 34.0 65.0
Subsidy to the railways for dividend relief and other concessions 141.6 n.a. -
Insurance schemes for the poor 3.2 n.a. -
Interest relief to riot victims 1.1 0.1 -94.9
Subsidy for helicopter in North Eastern Region 2.3 2.2 -3.9
Maintenance of buffer stocks for sugar 47.1 0.2 -99.5
Reimbursement to state trading corporation for loss on edible oil imports 5.4 11.0 104.7
Subsidy to Shipping Corporation of India for uneconomic shipping lines 3.0 n.a. -
Table III.15 (cont'd)
                                                     
173 Growth rate in real terms in rupees is similar.
174 The Expenditure Reforms Commission (ERC), constituted following the Budget Speech in
February 2000, suggested a series of measures to reduce the food subsidy and to rationalize the fertilizer subsidy(Ministry of Finance, 2001a).India WT/TPR/S/100
Page 79
1997/98a2001/02b Growth rate
(%)
Subsidy to shipyards 12.8 10.6 -17.1
Cochin Ship Yard Ltd 2.8 4.4 57.3
Hindustan Shipyard Ltd 3.5 0.9 -74.9
Acquisition of Ships - interest differentials 6.5 5.3 -17.9
Handloom subsidy 17.1 0.2 -98.7
Special rebate on handloom cloth 7.9 .. -
Subsidy on Janata cloth 8.1 .. -
Others 1.1 .. -
Compensation for exchange loss 37.4 323.1 763.8
Industrial Development Bank of India 4.9 32.6 571.3
Industrial Credit and Investment Corpn. of India 19.2 12.6 -34.5
National Housing Bank 0.8 1.8 125.2
Housing Development Finance Corpn. 12.6 14.3 14.1
Exchange loss under NRI Bond Scheme n.a. 1.8 -
Exchange loss on Resurgent India Bonds n.a. 259.9 -
Write-off of interest and penal interest on Government of India loan outstanding
against PDIL12.1 n.a. -
Debt Relief Scheme for Borrowers in J & K 13.5 10.1 -24.7
Write off loans Central Electronics Ltd. 5.5 n.a. -
Subsidy for Assam gas project n.a. 0.0 -
Guarantee Fee Subsidy n.a. 2.1 -
Heavy Engineering Corporation n.a. 0.6 -
Hindustan Cables Ltd. n.a. 0.2 -
Bharath Bhari Udyog Nigma Ltd. n.a. 0.1 -
Hindustan Machine Tools Ltd. n.a. 1.0 -
Praga Tools Ltd. n.a. 0.1 -
Subsidy to Hindustan Steelworks Construction Ltd. for guarantee fee n.a. 0.2 -
Interest subsidies 20.9 31.6 50.8
n.a. Not applicable.
.. Not available.
a Revised
b Budgeted.
Note: Rupee/US$ exchange rate used for 2001/02 = 2000/01 April-December only (= 45.39244).
Source: Ministry of Finance online information.  Available at www.nic.in/indiabudget/budget98-99 and
www.nic.in/indiabudget/ub2000.
130. The Food Corporation of India (FCI) purchases fo odgrains at fixed procurement prices (also
called Minimum Support Price or Levy Price).  This grain is distributed by the states at a "Central
Issue Price" through the Public Distribution Systems (PDS).  The subsidy is the difference between
the economic cost (acquisition and distribution costs)175, and the Central Issue Price.  The fertilizer
subsidy includes:  a subsidy on indigenous and imported urea;  subsidized freight rates for the
transportation of urea;  and the sale of other fertilizers (de-controlled fertilizers) at concessional
prices.  The subsidy on indigenous urea is intended to provide fertilizer to farmers at a "reasonable"
                                                     
175 The acquisition costs include the minimum support price, taxes, packaging, and other incidental
charges associated with procuring the grain;  the dist ribution cost includes trans portation and storage charges,
and administrative expenses of the procuring agency (the Food Corporation of India).WT/TPR/S/100 Trade Policy Review
Page 80
price and at the same time give producers a "reasonable" return on their investment176 (see
sections (2)(xiii) and (4)(iv)(b)).  Imports of urea are also subsidized because domestic production is
insufficient to meet demand.  In addition, phosphatic and potassic fertilizers, whose prices were
liberalized in 1992, are sold at a concessionary price to farmers in order to promote the use of a
balanced combination of the three types of fertilizer.
131. Interest rate subsidies accounted for 0.5% of total subsidies in 2001/02, having increased by
50% since 1997/98.  Under these schemes, the Government grants loans at concessionary interest
rates or forgoes interest payments in specific cases, for instance to the  PSEs.177  These interest rate
subsidies help to mitigate the effects of India's high real interest rates (Chapter I(1)(i)).  Interest rates
subsidies are managed by different ministries (e.g. the Ministry of Finance, of Heavy Industries and
Public Enterprises, of Steel, and of Information and Broadcasting) and are granted for very differentpurposes.  For instance, the Ministry of Finance provides loans at subsidized rates to  Goan Banks and
nationalized banks.  As part of their revival scheme, the Hindustan Paper Corporation Ltd., the Heavy
Engineering Corporation Ltd., and Hindustan Machine Tools Ltd. are granted interest subsidies by the
Ministry of Heavy Industries and Public Enterprises.  The Steel Authority of India Ltd., as part of its
financial and business restructuring agreement signed with the Government, was granted aRs 5 billion subsidy in 2000 to pay the interest on loans for the implementation of the Voluntary
Retirement Scheme (VRS);  it also benefits from a waiver on the interest on loans given by the
Government to the Indian Iron and Steel Company, a loss making subsidiary of the Steel Authority of
India Ltd., which has been referred to the Board for Industrial and Financial Restructuring (BIFR).
178
(iii) State-owned enterprises
132. State-owned enterprises have traditionally pl ayed an important role in the economy, and
continued to do so during the Review period;  they were set up to carry out industrialization andachieve national development goals, but have become a major burden on public resources (Box III.3).
In 2000 (31 March), there were 240 Central Public Se ctor Enterprises (CPSEs) (8 in construction, 157
involved in manufacturing, and 75 in rendering services),
179 down from 243 at the end of
March 1996,180 and approximately 946 State Level Public Enterprises (SLPEs).181  In general PSEs
continue to perform poorly and constitute a drain on  the central and state governments' budgets.  Of
the 240 CPSEs registered on 31 March 2000, some 44% (106) were loss making, while some 66 (as of
30 June 2000) industrial CPSEs were registered with the Board for Industrial and Financial
Restructuring (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act,
1985.182  At the state level, of the 946 SLPEs existing in March 2000, 551 showed losses, and
                                                     
176 The Retention Price cum Subsidy (RPS) Scheme for urea provides for a fixed retention price for
individual producers on a per tonne basis, based on the normative capacity utilizatio n rates prescribed by the
Government plus average and real costs and expenses.  The reasonable rate of return on investment is defined as
a pre-tax return on net worth, which corresponds to a post tax return of 12%.
177 Ministry of Finance (2001c), Vol. I.
178 For more examples see the Union Budget 2001-02 [Online].  Available at:
http://indiabudget.nic.in/ub2001-02/eb/vol2.htm [30 October 2001].
179 Department of Public Enterprises, Ministry of Heavy Industries and Public Enterprises online
information.  Available at http://www.dpe.nic.in/ [31 October 2001].
180 WTO (1998), p. 98.
181 Ministry of Disinvestment (undated).
182 Ministry of Heavy Industries and Public Enterprises (2000).India WT/TPR/S/100
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241 were non-operational183;  some 184 SLPEs have been identified as candidates for disinvestment,
restructuring or closing down.184
Box III.3:  Public sector enterprises
Public sector enterprises (PSEs) were established initially to:
- provide infrastructure for India's industrialization and economic growth needs;
- create employment opportunities and promote balanced regional development;- promote self-reliance through import substitution and export promotion;- generate resources for public investment;  and- prevent/reduce concentration of private economic power.
Policy in the 1960s and 1970s was largely guided by the Industrial Policy Resolution of 1956, which gave
the public sector a strategic role in economic development.  However, according to the authorities, the public
sector has now outgrown itself and its shortcomings have become apparent from the low level of capacityutilization, inability to innovate and take timely decisions, as well as interference from government agenciesin internal decision-making processes, etc.  The PSEs have also become a major drain on governmentresources.  It is estimated that government investment in public sector enterprises had grown fromRs 290 million in 1951 to some Rs 2,526 billion in the year 2000.
Disinvestment/Privatization
The Industrial Policy Statement of 1991 announced that it would begin the process of deregulation and
disinvestment in the public sector.  The disinvestment would be carried out in stages, starting with a phasingout of industrial licensing requirements.  These requ irements were withdrawn for all but 18 industries, and
liberalization of foreign investment restrictions opened sectors to international competition.  PSEs that wereidentified as weak were to be referred to the Board of Industrial and Financial Restructuring (BIFR) and
either restructured or closed down.  In other PSEs the Government was to reduce its share of equity or to
privatize the company completely.  The process, however, has not been easy.  Most companies that wereregistered with the BIFR and which were considered not viable, have yet to be closed down.  In addition, thedisinvestment programme has been slow to take off an d, judging from receipts, appears to have fallen far
short of targets in recent years.  In 1999/2000 an d 2000/01, for example, receipts from disinvestment
(Rs 18.3 billion and Rs. 18.7 billion respectively) fell far sh ort of the target of Rs 100 million.  It is unclear
whether the Government will be in a position to meet its target for 2001/02 of Rs 120 million.
In March 1999, the Government identified strategic PS Es as arms and ammunition and allied industries such
as defence equipment, aircraft and warships;  atom ic energy (except generation of nuclear power and
application of radiation and isotopes to agriculture, medicine, and non-strategic industries);  and railwaytransport.  All other PSEs are considered non-strate gic and the Government in subsequent statements has
declared that it would consider reducing its share of eq uity in these companies to below 26% if necessary.  In
addition, there appears to be an increased emphasis on selling to strategic buyers.
The main goals of the disinvestment programme remain as before:
- to restructure and revive potentially viable companies and to close down those that are no longer
viable;
- to reduce government equity in all non-strategic companies to 26% or below, if necessary;
- to protect the interests of employees and to put into place a mechanism to raise funds to provide an
adequate safety net for employees;
Box III.3 (cont'd)
                                                     
183 Ministry of Disinvestment (undated (b)).
184 Of these, it seems that the process of disinvestment, restructuring or closure had been initiated in
30 companies by early 2001 (Department of Disinvestment, undated).WT/TPR/S/100 Trade Policy Review
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- to establish a Department of Disinvestment to give a fresh impetus to privatization and to formalize
the programme;
- to emphasize strategic sales of PSEs;  and
- to use the receipts of disinvestment for meeting ex penditure in social and infrastructure sectors,
closing down PSEs, and retiring public debt.
In 1999 also, the Government created the Department of Disinvestment (later to become the Ministry of
Disinvestment).  The Ministry under the terms of the original notification (No. CD-551/99, 10 December
1999), would deal with all matters relating to disinvestment of central government equity from CPSEs, makedecisions on the recommendations of a Disinvestment Commission, which would lay out the modalities ofdisinvestment/restructuring, and implement disinvestment decisions (including appointment of advisors,pricing of shares etc.).  Final decisions on disinvestment are taken through a three-tier mechanism:  the
Cabinet Committee on Disinvestment (CCD), chaired by the Prime Minister, which makes decisions on
disinvestment upon recommendations of the Core Groups of Secretaries on Disinvestment (CGD);  theCGD, which supervises and monitors progress on disinvestment and makes recommendations to the CCD;and the later-Ministerial Group, which is responsible for day-to-day implementation issues.
Source: Based on information provided by the authorities;  and Department of Disinvestment (undated),
Disinvestment:  Policy and Procedures .
133. Some of the common reasons for PSEs "sickness" include the use of obsolete technology, the
lack of economies of scale, low productivity, a surplus of labour, a general lack of resources,including raw materials, and a heavy interest burden.
185  The business culture in these enterprises has
also contributed to their poor performance186, as has political interference in their management.
134. The Government has implemented several strategies to improve the PSEs' performance and
combat "sickness", including periodic performance review meetings with the administrative
Ministries, reduction of surplus labour through Voluntary Retirement Schemes, technologicalimprovement, and the restructuring of companies, in cluding their conversion into joint ventures.  The
introduction of the Memorandum of Understanding (MOU) system in 1987/88, a performance
agreement between the PSEs' management and the Government (i.e. the Administrative Ministry),
was also aimed at improving PSEs' performance; MOUs stipulate objective criteria to evaluate
managerial performance.  In addition, the MOUs are an attempt to increase PSEs' autonomy andaccountability.  In 2000/01, 107 PSEs (163, including the subsidiaries of the PSEs) signed MOUs.
187
The MOUs, according to the authorities, have helped increase the operational autonomy of the PSEsand their ability to compete with the private sector.  In addition, quarterly performance reviews have
allowed PSEs to better evaluate their achievements as outlined in the MOUs and has boosted
employee morale.  The financial performance of these companies also appears to have improved in
recent years.  In 2000/01, it is estimated that of the 107 PSEs that signed MOUs, 77 achieved ratings
of "good" to "excellent".
135. In an effort to recognize PSEs that had performed satisfactorily, in 1997 the Government
identified 11 well performing PSEs as "Navratnas" (i.e. nine gems).
188  The criteria for selecting these
                                                     
185 Ministry of Heavy Industries and Public Enterprises (2000).
186 Planning Commission (undated (a)), Vol. II.
187 Ministry of Heavy Industries and Public Enterprises (2000);  Ministry of Finance (2001a).
188 These enterprises are:  Indian Oil Company (IO C), Indian Petrochemicals Corp. Ltd. (IPCL), Oil
and Natural Gas Commission (ONGC), Bharat Petroleum Corp. Ltd. (BPCL), Hindustan Petroleum Corp. Ltd.(HPCL), National Thermal Power Corp. (NTPC), Steel Authority of India Ltd. (SAIL), Videsh Sanchar NigamLtd. (VSNL), Bharat Heavy Electricals Ltd. (BHEL), Gas Authority of India Ltd. (GAIL), and Manhanagar
Telephone Nigam (MTNL).India WT/TPR/S/100
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enterprises included factors such as size, performance, nature of activity, and future prospects.
Because of their superior performance, enhanced autonomy has been granted to their Boards of
Directors.  In 1999, 39 enterprises were defined as "mini-ratnas" (mini–gems) (i.e. PSEs that
performed well, but not as well as the Navratas).  The Government has granted enhanced financial,
managerial, and operational autonomy to these profit-making enterprises.189
136. Despite the strategies adopted by the Government and the aforementioned success stories, the
performance of PSEs continue to be weak and they continue to represent a drain on the Government's
budget.  Collectively, CPSEs have run a persistent deficit since 1997/98, which is financed by the
Central Government budget in the form of equi ty and loans (Table III.16).  Since 1999/00, budgetary
support has increased continuously, with non-plan loans accounting for more than 85% of total
support to PSEs.  However, this does not take in to account implicit subsidies provided to PSEs by
central and state governments.  For example, implicit subsidies by state governments to State Level
Public Enterprises (SLPEs) amounted to Rs 63.8 billion.190  In addition, the Government may write
off loans and provide interest rate subsidies;  these subsidies are sometimes extra-budgetary.
Table III.16
Budgetary support to public sector enterprises, 1997-02
(Rupees million and per cent)
1997/98 1998/99a1999/00 2000/01 2001/02a
Total support 549,589.9 713,982.8 617,526.4 708,110.5  811,365.8
(% of GDP) (3.6) (4.1) (3.2) (3.7) (3.9)
Per cent of total
Equity 9.1 8.5 11.2 11.3 11.0
Loan 4.6 3.7 3.5 3.5 1.8
Non-plan loans 86.3 87.8 85.3 85.2 87.2
Memorandum item:
Deficit of Central Public Enterprises (% of GDP) -1.8 -1.4 -1.8 -1.7a1.6a
a Budget.
Source: Government of India online information.  Available at:  http://www.indiabudget.nic.in/;  and IMF (2001), Recent
Economic D evelopments and Selected Issues, October.
137. While the imperative for privatization (divestment) of the public sector appears to have arisen
largely from fiscal considerations191, a strong divestment programme is also believed to be necessary
to improve PSEs' governance and efficiency192;  the authorities also state that disinvestment is crucial
for better utilization of resources and to improve prospects for employment and economic
regeneration.  Nevertheless, progress in divesting PSEs has been slow (and often far short of targets).Since 1991/92, there have been 14 rounds of disinvestment;  however, disinvestment has actually
taken place in only 42 PSEs;  of these, until 2000, when the Government changed its strategy to sell to
strategic investors rather than solely through share issues, most involved the sale of a small
                                                     
189 For an enterprise to qualify as "mini-ratna" it should have earned profits continuously for the last
three years, have positive net-worth, does not seek budgetary support or guarantees from the Government, andhave not defaulted in the repayment of loans/interests to the Government (Ministry of Heavy Industries andPublic Enterprises, 2000).
190 This includes support to six states:  Karnataka, Kerala, Madhya Pradesh, Maharashtra, Rajasthan,
and West Bengal (Ministry of Disinvestment, undated (c)).
191 Report of the High Level Committee on Competition Policy and Law [Online].  Available at:
http://www.nic.in/dca/comp/mainfile.htm#ch1 [17 September 2001].
192 IMF (2000).WT/TPR/S/100 Trade Policy Review
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percentage of equity.193  Disinvestment proceeds during 1997/98–2001/02 amounted to some
Rs 156 billion.194  In 2000, 47 additional PSEs were approved for disinvestment at the central level.195
138. The Government announced a new disinvestment policy in March 1999, under which up to
74% (and even more, if necessary) of its stake in non-strategic PSEs (i.e. other than defence, railways,
and atomic energy) could be disinvested (Box III.5).  The decision to disinvest would be on a case-by-
case basis taking into account whether the presence of the public sector is required as a countervailingforce to prevent concentration in private hands or whether the industrial sector requires the
establishment of a proper regulatory mechanism to protect consumer interests before PSEs are
privatized.
196  The authorities acknowledge that effective legislation on competition policy would
ensure protection of consumers even in cases where present public sector monopolies became private
sector monopolies;  however, the present law (the Monopolies and Restrictive Trade Practices Act(section (iv) below)) does not have provisions to address monopolistic practices or mergers and
therefore cannot address the impact on the consumer of a public monopoly becoming a private
monopoly.  A new competition policy is currently being drafted.  For the present, therefore, the
authorities maintain that there is a need for gove rnment intervention and monitoring on these issues.
139. In order to expedite the disinvestment process, the Government constituted the Cabinet
Committee on Disinvestment (CCD), headed by the Prime Minister, and the Department of
Disinvestment (created in December 1999), which subsequently became the Ministry of
Disinvestment.  However, the authorities do not consider these efforts to be adequate.   Accordingly, it
had been proposed  that the management of all PSEs earmarked for disinvestment be transferred to the
Ministry of Disinvestment.
197 In the event, it was decided that closer cooperation between the
Ministry of Disinvestment and individual ministries would ensure a more efficient disinvestment
process.
140. Although the need to arrest the drain on its budget has apparently provided a major impetus to
central government's drive to privatize state-owned enterprises and thereby increase the private
sector's role in the economy, privatization would also promote competition, particularly in a number
of basic infrastructure services, notably energy, communications and transport, which are essential for
the smooth functioning of the economy (Chapter IV(4)(vi)).  By and large, these services have beenprovided by state monopolies, most of which are inefficient, and therefore often loss-making, with
outdated capital, and unable to meet the essential needs of the economy.
                                                     
193 Department of Disinvestment (undated), pp. 18-19.  The decision to sell to strategic investors was
made mainly because the authorities found that:  management control could not be transferred, with the result
that efficiency gains could not be made;  if a limited sh are of equity was divested, a subsequent decision to sell
the rest of the company to a strategic investor may not be possible if the remaining Government share of equitywas too small;  and sales of a small percentage of equity also gave the impression that the Government wasdivesting in order to finance its fiscal deficit (Ministry of Disinvestment, Disinvestment Till Now, undated (d)).
194 Ministry of Finance (2002a).
195 For the status of these companies please see the Ministry of Disinvestment (undated (e)).
196 Department of Disinvestment (2001b).
197 The Ministry would be granted five years to execute the privatization programme.  Initially, the
Ministry will only be in charge of the PSEs referred to the Disinvestment Commission (formed in 1996 as anindependent, non-statutory, advisory body to make its recommendations on the PSEs referred to it), and then itwill be expanded to include the entire public sector.India WT/TPR/S/100
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(iv) Competition policy and regulatory issues
(a) Competition policy
141. Competition policy in India continues to be regulated by the Monopolies and Restrictive
Trade Practices Act, 1969 (MRTP Act), and a parallel law, the Consumer Protection Act, 1986
(COPRA).198  The latter provides for the protection of consumers' interest through the establishment
of consumer councils, which settle grievances regarding, inter alia , quality and pricing of goods and
services.  Under this Act, consumers have the right to seek redress against "unfair trade practices" (as
defined in 36A of the MRTP Act)199 and "unscrupulous exploitation of consumers", and are entitled to
receive compensation.
142. Originally the thrust of the MRTP Act was dir ected towards:  the prevention of concentration
of economic power;  the control of monopolies;  and the prohibition of monopolistic trade practices,restrictive trade practices, and unfair trade practices.  Major amendments were made to the MRTP Act
in 1991.  Provisions relating to pre-entry restrictions with regard to prior approval of the Central
Government for establishing a new undertaking, expanding an existing undertaking, amalgamations,
mergers and take-overs were all deleted from the statute.  As a result of these amendments, the
emphasis of the Act shifted from the prevention of concentration of economic power to curbingmonopolistic, restrictive, and unfair trade practices.
143. The MRTP Commission, a quasi-judicial body established in 1970, receives complaints both
from registered consumer and trade associations and from individuals, either directly or through
various government departments.  Complaints regarding restrictive or unfair trade practices are
referred to the Director General of Investigation and Registration (DGIR) for preliminary
investigation.  The Commission can also order a preliminary investigation by the DGIR when a
reference on a restrictive trade practice is received from the Central/State Government, or when theCommission's own knowledge warrants a preliminary investigation.  Enquiries are instituted by the
Commission after the preliminary investigation.
144. Promotion of competition through competition law can only be realized with effective
enforcement.  However, the Commission's performance in  this regard appears to be rather weak.  For
instance, during April-December 2000 the Commission received 1,554 enquiries related to restrictivetrade practices, of which 102 cases were settled, and 1,424 enquiries regarding unfair trade practices,
of which 92 cases were dealt with.
200 These cases involved only Indian companies, including state-
owned in sectors such as real estate, automotive industries, and pharmaceuticals.  The authorities
noted that the substantial difference between the cases dealt with and the enquiries received was
because a large number of the received enquiries were dismissed at the outset since they were notcovered by the MRTP Act.
145. In addition to the MRTP Commission, the Securities Exchange Board of India (SEBI) has put
in place a regulatory framework to ensure equal opportunities for investors, and to deeper capital
markets.  Regulations dealing with unfair practices, like insider dealing, have, according to the
authorities, been enforced accord ing to international standards.  The Board has laid down a take-over
code to ensure competitive bids and free transferabil ity of company shares so that shareholders get the
                                                     
198 There is some overlap in the coverage of the two Acts.  However, there are several distinctive
features in regard to the constitution of the adjudicatio n machinery, jurisdiction, type of persons who may seek
relief, nature and scope of relief, administrative procedure, etc.
199 Unfair trade practice means any practice that, for the purpose of promoting the sale, use or supply of
any good or service, causes loss or injury to the consumer.
200 Ministry of Law, Justice, and Company Affairs (2001).WT/TPR/S/100 Trade Policy Review
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choice, as well as the right price for their shares.  The idea behind the code is to provide greater
transparency in the acquisition of shares and the take-over of a company.
146. According to the High Level Committee on Competition Policy and Law (the Committee),
the present MRTP Act is limited in its scope and hence fails to fulfil the need of a competition law in
an age of growing liberalization.  For instance, the Act has no definition of certain trade practices that
are restrictive in character.  These include:  abuse of dominant market position;  cartels, collusion, andprice fixing;  bid rigging;  boycotts and refusal to deal;  and predatory pricing.
201  In addition, its
provisions do not apply to specific sectors such as banking and insurance;  instead, specific provisions
related to competition exist in the Reserve Bank of India Act, State Bank of India Act, and Insurance
Act.  Unless otherwise stipulated by the Central Government, public sector enterprises are not covered
by the MRTP Act.202
147. In view of the limitations of the MRTP Act, the Indian Cabinet introduced a Competition Bill,
2001 in Parliament on 6 August 2001.203  This Bill, if enacted, would replace the MRTP Act, 1969
and would create a new regulatory body, the Competition Commission of India (CCI), with branches
in different Indian cities.204  The CCI would replace the MRTP  Commission.  The Bill is aimed at
checking the abuse of anti-competitive agreements and dominant market position, and regulatingprocedures related to mergers and acquisitions.
205
(b) Price controls
148. Various types of price control are still in place for essential commodities such as fertilizers,
petroleum and petroleum products, food, and pharmaceuticals.  The 2000/01 Budget announced the
phasing out of some of these price controls.  The Retention Price-cum-Subsidy Scheme (RPS) for
fertilizers will be phased out and the price of urea freed by 1 April 2006, and replaced by a "Group
Concession Scheme"206;  the Administered Pricing Mechanism (APM) in the petroleum sector will be
eliminated by March 2002 (as planned in 1997);  as a first step to liberalize the price of sugar, a
futures market will be introduced for this commodity  and is expected to be in operation by the end of
2002;  and the number of drugs subject to price controls is scheduled to be reduced.  It is not clear
whether price controls on items mentioned in the previous TPR have been removed (cattle fodder,
coal, automobile components and accessories, paper, including newsprint paperboard and strawboard,cement, textile machinery, household appliances, exercise books, insecticides and fungicides, tea,
seeds of food and horticultural crops, switches, plugs and socket outlets).  The authorities noted,
however, that price controls on textiles, and on iron and steel items were withdrawn.
149. At present, urea (a nitrogenous fertilizer) is the only fertilizer subject to price and distribution
controls.
207  In 1992, after the liberalization of the price of phosphatic and potassic fertilizers, a
                                                     
201 While complaints relating to anti-competitive practices can be tried under the generic definition of
restrictive trade practice (which prevents, distorts, or restricts competition), the absence of specification ofidentifiable anti-competition practices may give room for different interpretations by different courts of law,with the result that the law may not be enforced (Report of the High Level Committee on Competition Policyand Law [Online].  Available at:  http://www.nic.in/dca/comp/mainfile.htm#ch1 [17 September 2001]).
202 Section 3, the Monopolies and Restrictive Trade Practices Act, 1969.
203 Financial Times,  27 June 2001.
204 The authorities expect the Bill to be passed around March-April 2002.
205 The Competition Bill, 2001.
206 Ministry of Finance (2001c), Part A.
207 In 1994, low analysis nitrogenous fertilizers were decontrolled.India WT/TPR/S/100
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concession scheme was introduced for these products.  Under this scheme Maximum Retail Prices
(MRP) are fixed by the Central Government/State Governments.208
150. Minimum Support Prices (MSP) are fixed for 25 major agricultural commodities including
rice, wheat, pulses, and oil seeds (Chapter IV(2)(iv)(b)).  Prices of some petroleum products are still
determined through the Administered Price Mechanism (APM), which has changed considerably over
the years.  The APM was implemented in the early 1970s when prices of petroleum products weredelinked from import prices and were instead set according to a "cost-plus mechanism" with the
Government fixing prices and rates of returns.  The APM provides for a cross-subsidy system within
the petroleum sector.  Thus, some products like LPG, kerosene, and diesel were cross-subsidized by
overpricing other oil products.  In 1998, a four-year  transition plan, aimed at completely phasing out
government controls in the sector by 1 April 2002, was put in place.  Since April 1998, the cost-plusformula for compensating the national oil companies (for refining indigenous crude oil) was abolished
and replaced by a price as a percentage of f.o.b. price of imported crude oil.
209  Products such as
naphta, fuel oil, low sulphur heavy stock (LSHS) , bitumen, paraffin wax, and aviation turbine fuel
were removed from the APM, so that their prices are now determined by the market.  However, major
retail products such as petrol, diesel, kerosene for public distribution, and domestic LPG remain underthe APM
210;  kerosene and domestic LPG not destined for the public distribution system are not
subsidized and are freely marketed through parallel  marketers.  Under the existing mechanism, the
refineries are paid on an import price parity basis for the products currently subject to price controls.
It is expected that the subsidy for kerosene and domestic LPG distributed through the public
distribution system will decline to 33% and 15% respectively, of the import parity price by
1 April 2002;  the cost of this subsidy is expected to be met out of the central government budget
instead of through cross-subsidies from other petroleum products.211  The Budget of 2002/03
confirmed the dismantling of the APM as of 1 April 2002.212
151. The current drug policy is aimed at ensuring the availability of quality drugs at "reasonable
prices".  Prices of 74 bulk drugs listed in the First Schedule of Drugs (Prices Control) Order, 1995 and
the formulations thereof are fixed/revised under provisi ons of this Order;  the trade margin to retailers
on scheduled formulations is prescribed as 16% of  Maximum Retail Price (MRP) exclusive of excise
duty.213  Under the 1996 drug policy, the price of a drug is controlled if it has an annual turnover of
Rs 40 million or more.  For drugs of popular use in which there is a monopoly situation (i.e. 90% of
the market share) the threshold is Rs 10 million or more.
152. Under the new Pharmaceutical Policy 2002, announced on 5 February 2002, the Government
is considering phasing out some of these price controls, but it will retain the power to intervene(including through the reinstitution of price controls) if prices behave "abnormally" or rise
"unreasonably".
214  The Government may determine ceiling prices beyond which an increase in prices
                                                     
208 This concession scheme was introduced so that  nitrogenous, phosphatic, and potassic fertilizers
continued to be used in the correct proportion;  when the prices of phosphatic and potassic fertilizers were
liberalized, they increased and farmers used urea instead  (whose price was still controlled).  (Economic Survey
and Fertilizers [Online].  Available at:  http://www.d irectorier-today.com/i_fertilizers.htm [22 October 2001]).
209 Payments to crude producers were fixed at 75% of (f.o.b.) import prices in 1998-99;  77.5% of
(f.o.b.) import prices in 1999-00;  80% of (f.o.b.) import prices in 2000-01;  and 82.5% of (f.o.b.) import pricesin 2001-02.  Ministry of Petroleum and Natural Gas (undated).
210 Ministry of Petroleum and Natural Gas (2001).
211 Ministry of Petroleum and Natural Gas (undated).
212 Ministry of Finance (2002b).
213 Drugs and Pharmaceuticals [Online].  Available at:  http://www.directories-toda.com/i_drugs.htm
[19 October 2001].
214 Ministry of Finance (2001c).WT/TPR/S/100 Trade Policy Review
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would not be permissible.  The National Pharmaceutical Pricing Authority (NPPA), which fixes drug
prices in India, will present a list of some 35 drugs to be kept under control to the Ministry of
Chemicals.215  The new policy stipulates that bulk drugs wi th an annual turnover of Rs 250 million per
year and market share of over 50%, as well as those produced by a company with annual turnover of
Rs 100-250 million, and with a market share of 90%, should remain controlled.216
(v) Intellectual property rights
153. Since its previous Review, India has joined the Paris Convention (7 December 1998) and the
Patent Cooperation Treaty.217  In order to comply with its WTO commitments, India has amended the
Trade Mark Act and the Design Act, and enacted new legislation to protect geographical indications,
integrated circuits, and plant varieties.218  A new amendment to the Patents Act, 1970 has been
introduced in Parliament, as has a Biological Diversity Bill.219  India has notified several laws to the
Council for TRIPS.220
154. The amendment of old laws and introduction of new ones is an attempt to put Indian
legislation in conformity with the TRIPS Agreement as well as to extend protection to formerly
unprotected rights.  The patent law still requires some amendments, and most laws, despite extending
protection to different areas, also provide for either a broad compulsory-licence system or for a vastlist of limitations and exceptions to the exclusive right.  This is the case for the patent, copyrights and
integrated circuits laws, which seem to have been designed to maintain protection for key Indian
industries, namely the pharmaceutical and software industries.  In addition, it has been suggested that
enforcement is poor
221, although the Government has taken various steps to improve enforcement,
including the formation of a Copyright Enforcem ent Advisory Council in the Ministry of Human
Resource Development, which makes recommendations on enforcement and monitors their
implementation;  and the organization of seminars on IPR-related subjects to raise public awarenessabout the importance of IPRs and their enforcemen t.  Because enforcement is the responsibility of
state governments, the Central Government has requested them to set up special cells for copyright
enforcement, headed by senior police officers;  these cells also handle enforcement issues relating to
other IPR issues.  Training programmes in enforcem ent are also organized for senior administrators,
senior police officers, and customs officers.
                                                     
215 This would reduce the number of drugs under price control from 74 to 35.
216 The Economic Times,  "New drug policy delayed to mid November" [Online].  Available at:
http://economictimes.indiatimes.com/today/19econ04.ht m [19 October 2001], and Pharmaceutical Policy –2002.
217 India is also a member of WIPO (1975), the Berne Convention, the Phonograms Convention
(Geneva, 1971) (12 February 1975), the Nairobi Treaty on the Protection of the Olympic Symbol(19 October 1989), and the Washington Treaty on Integrated Circuits (WTO, 1998);  and WIPO onlineinformation.  Available at:  http://www.wipo.org).
218 The Plant Variety Protection and Farmers Rights Bill was passed by Parliament on 9 August 2001.
This legislation protects the rights of both plant breeders and farmers.  Under the legislation, plant breeders will
have full control over production and commercialization of seeds.  Violation of breeders' rights will invite a fine
of up to Rs 1 million and a two-year jail term.  The bill recognizes the rights of farmers to save and sell seedsproduced on their farms, provided they are sold under a generic name ( Wall Street Journal,  4 October 2001).
219 The Biological Diversity Bill addresses the basic concerns of access to, and collection and
utilization of, biological resources and knowledge by foreigners, and the sharing of benefits arising out of suchaccess.  The legislation provides for a National Authority, which will grant approvals for access, subject to
conditions that ensure equitable sharing of benefits.  The Biodiversity Bill also includes provisions for the
protection of traditional knowledge through the registration of traditional knowledge and the development of asui generis  system
 (WTO document IP/C/W/198, 14 July 2000).
220 See WTO documents IP/N/1/IND/L/1, 11 January 2001 and IP/N/1/IND/2, 24 October 2001.
221 USTR (various years) and International Intellectual Property Alliance (various years).India WT/TPR/S/100
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155. The Department of Industrial Development, with in the Ministry of Commerce and Industry, is
concerned with industrial property rights.  The Department also administers the office of the
Controller General of Patents, Designs & Trade Marks.  The latter supervises the working of the
Patents Act, 1970, the Designs Act, 2000, the Trade and Merchandise Marks Act, 1999, and the
Geographical Indications of Goods (Registration and Protection) Act, 1999, and provides advice to
the Government on matters relating to these subjects.  The Copyright law is dealt with by the Ministryof Education, while the Protection of Plant Varieties and Farmers' Rights Act, and the Semiconductor
Integrated Circuit Layout Design Act are administered, respectively, by the Ministries of Agriculture
and Information Technology.
156. In India, the protection of intellectual property rights is on the basis of reciprocity as
stipulated in various laws.  India grants national treatment to other WTO Members and to members ofthe Paris and Berne conventions.
(a) Patents
157. Patents in India are granted under the provisions of the Patents Act, 1970, amended in 1999.
The amendment provided for a mailbox facility for pharmaceuticals and agriculture chemicals, and
for granting exclusive marketing rights, in accordance with India's obligations under Articles 70.8 and70.9 of the TRIPS Agreement.
222  An amendment to the Patents Act, the Patents (Second
Amendment) Bill, 1999, was introduced in Parliament in December 1999.  This Bill is presently under
consideration by a Joint Committee of Parliament.  According to the authorities, this Bill seeks to
comply with other obligations under the TRIPS Agreement, and to simplify procedures.  The Bill
provides for stronger protection to patent holders .  It includes a 20-year uniform protection and a
narrower framework for compulsory licensing.  It al so provides for the deletion of some sections, such
as the provision seeking to oblige patentees to manufacture their inventions in India and the sectionconcerning "licences of right".  However, the Bill does not include product patents for drugs and
chemicals.  India is taking the full transition period (i.e. until 2005) to meet its obligations, as allowed
under the TRIPS Agreement, for countries that did not provide patent protection prior to the entry into
force of the TRIPS Agreement (Article 65.4).
223
158. At present, the Patent Act, 1970, as amended in 1999, allows for the patentability of products
and processes with certain exceptions:  inventions related to atomic energy;  and inventions intended
for use or capable of being used as food, medicine, or drug, or relating to substances prepared or
produced by chemical processes.  Processes to make such substances are patentable;  however, the
patent term for processes in respect of food, medicine s, or drugs, is limited to five years from when
the patent was granted or seven years from the date at which the patent application was filed,whichever is shorter.  Product patents expire 14 years from the date of patent filing (Section 53).
Protection is for a shorter term than that required by TRIPS.  Exclusive marketing rights are granted
for a period of five years from the date the C ontroller approves the application (Section 24B).
159. Patent applications are filed at the Patent Office.  The Controller General of Patents, Designs
and Trade Marks refers the application and specification of the patent to an examiner, who shouldmake a report within 18 months (Section 12).  The Controller may refuse or require an amended
application if the invention claimed in the specification is not an invention or if the invention could be
used in any manner contrary to law.  Once the Co ntroller has accepted the complete specification, the
                                                     
222 This amendment was introduced to implement the recommendations and rulings adopted by the
DSB as a result of the disputes initiated by the United States and the European Union regarding patentprotection for pharmaceutical and agricultural chemi cal products by India (WT/ DS50/R, WT/DS50/AB/R, and
WT/DS79/R).
223 The Hindu,  13 September 2001.WT/TPR/S/100 Trade Policy Review
Page 90
applicant is notified and the acceptance is advertised in the Official Gazette  for public inspection
(Section 24).224  Average time for advertisement of acceptance in the Gazette  is one month.  Within
four months from the date of advertisement, any interested party may give notice to the Controller of
their opposition, specifying the grounds (Section 25).  The Controller will notify the applicant if any
notice is taken into consideration, so that the applicant has an opportunity to be heard.
160. Currently it is difficult to obtain a patent as the Patent Office has a backlog of
30,000 applications (of the 33,230 patents filed in 1998/99 only 2,931 have been examined)225;  and
there is a severe shortage of patent examiners.226  For instance it takes about three years to grant a
patent for food and drug inventions, and about si x years for other inventions.  The Government is
currently modernizing its patent offices and increasing the number of patent examiners in order to
clear the backlog of applications.227  While the number of patents granted has increased since
1995-96, the number of patents in force has declined (Table III.17).
Table III.17
The number of patents granted and in force, 1995-00
1995-96 1996-97 1997-98 1998-99 1999-00
Patents granted
Indians 415 293 619 645 557
Foreigners resident abroad 1,118 614 1,225 1,155 1,324
Total 1,533 907 1,844 1,800 1,881
Patents in force
Indians 2,098 2,003 2,047 2,088 2,200
Foreigners resident abroad 6,994 7,202 6,882 6,691 6,458
Total 9,092 9,205 8,929 8,779 8,658
Source : Technology Information, For ecasting and Assessment C ouncil online information.  Available at:  http://www.tifac-
org.in/do/pfc/stud/comm.htm.
161. A patent may, on the petition of any person or of the Central Government, be revoked by the
High Court on various grounds, including:  that the patent was wrongfully obtained;  that the subject
is not an invention or does not involve any inventive step;  or that the patent was obtained upon falsesuggestion or representation (Section 64).  The Central Government may also revoke a patent on
grounds of "public interest" (Section 66).  According to the authorities from April 1998 to
March 2000 no patents were revoked under either grounds.  No data were made available for the rest
of the period under review.
162. Three years after the date a patent is sealed, (two years from the date of approval by the
Controller), anyone may apply to the Controller to  obtain a compulsory licence to work the patent
alleging that the reasonable requirements of the public have not been satisfied
228, or that the patented
invention is not available to the public at a reasonable price (Section 84).  The Central Government
may, in the "public interest", decide that a compulsory licence should be granted at any time
(Section 97).  Compulsory licensing may also be applied in respect of exclusive marketing rights
(Section 24C).  Two years after the granting of the first compulsory licence anyone may apply to the
                                                     
224 The average time taken for intimation to the app licants of acceptance of application is five days.
225 TIFAC News, "Mahastra tops list of patents filed by Indians" [Online].  Available at:
http://www.tifac.org.in/news/press09.htm [24 September 2001].
226 USTR (various years).
227 The modernized Delhi and Chennai Patent offices became operational in July and August 2001.
228 Article 90 of the Act defines in detail when it is that the reasonable requirements of the public are
deemed not to be satisfactory.India WT/TPR/S/100
Page 91
Controller for an order to revoke the patent (Section 89).  The authorities indicated that no
compulsory licences have been granted since 1998.  The Indian Government has co-sponsored a
submission by a group of developing countries to the TRIPS Council on issues concerning TRIPS and
public health229, as well as a draft Ministerial declaration on the matter.230  These underlined, inter
alia, the importance the authorities attached to co mpulsory licensing and parallel importation as
instruments to protect public health, in particular with a view to the post-TRIPS era, whenpharmaceuticals will be a patentable subject-matter.
163. Three years from the date a patent is sealed, the Central Government may ask the Controller
to endorse a patent with the words "Licences of right" on the grounds that the reasonable requirements
of the public have not been satisfied or that the patented invention is not available at a reasonable
price (Section 86).  Patents for inventions relating to food, drugs or medicines, and chemicals areautomatically endorsed with the words "Licenses of right", after a period of three years from the date
of sealing of the patent (Section 87).  Between  April 1998 and March 2000, 1,336 patents were
endorsed with the words "Licences of right".  The Central Government may also acquire an patented
invention for a public purpose.  The Government would pay compensation to the applicant or the
patentee (Section 102).
164. Any person may institute a suit for infringement of patent in any domestic court not inferior
to a district court (Section 104).  Failure to comply with the court's decision may result in
imprisonment of up to two years, or a fine.
(b) Trade marks
165. Trade marks are regulated by the modified Trade Marks Act, 1999.  The Act extended
protection to well known marks, service marks, and collective marks, as well as the length of the
protection period.  The definition of infringement has also been expanded.
231  However, the authorities
noted that this Act has not yet been "operationalized" (i.e. regulations have not been put in place).
166. To register a trade mark in India an applicati on in the prescribed form with the required fee
must be filed in one of the five offices of the Trade Marks Registry.232  The application is examined to
ascertain whether the trade mark is distinctive and to ensure that it does not conflict with existing
registered or pending trade marks;  an examination report is then issued.233  If a trade mark is found to
be acceptable, it is advertised in the Trade Marks Journal  to allow others to oppose the registration.
If there is no opposition or if a decision is made in favour of the applicant, then the mark is registered
and a certificate of registration is issued.
167. Registration of a trade mark confers on the registered proprietor the exclusive right of use and
to obtain relief in case of infringement.  Registration is not compulsory;  however, withoutregistration, the owner cannot bring an action for infringement.
                                                     
229 WTO document IP/C/W/296, 29 June 2001.
230 WTO document IP/C/W/312, 4 October 2001.
231 IndiaIP.com news services, "New Trade Marks Act still not notified – Rules being framed"
[Online].  Available at:  http://www.indiaip.com/main/news/india/09may03.htm [26 April 2001].
232 The appropriate office means the office within whose territorial limits the applicants resides or has
his principle place of business in India.  In case of fo reign applicants, the place mentioned as the address for
service in India will determine the appropriate office at which the application should be filed.
233 It is not possible to register a trade mark that co uld be confused with another already in use, or a
trade mark that describes the character or quality of goods, which other traders may reasonably want to use inthe course of their business.  The sign constituting a trade mark should not conflict with a mark alreadyregistered or pending registration.  Also some signs are prohibited from registration under the directions of theGovernment.WT/TPR/S/100 Trade Policy Review
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168. Registration is valid for an initial period of ten years and can be renewed for further periods
of ten years on payment of a prescribed fee. 234  By paying the renewal fees every ten years, the mark
can be kept in force indefinitely.  However, if the registered mark is not used for a continuous period
of five years and three months from the date on which it was entered in the registry, it is liable for
removal from the registry on the grounds of non-use.  If the renewal fee is not paid within the
prescribed period, the mark is removed from the registry.
169. The definition of infringement has been expanded in the new Act.  This is no longer limited to
use of the mark in respect to identical goods;  use of  an identical or similar mark in respect of similar
goods could constitute infringement.  Use of an identical or similar mark in respect of goods or
services, even on completely unrelated goods or services, could constitute infringement if:  the
registered trade mark has a reputation in India, and the use of the mark without due cause takes unfairadvantage of or is detrimental to, the distinctive character or repute of the registered mark.  Use of a
registered trademark as a trade name or part of a trade name could also constitute infringement.
Applying a registered trade mark to labelling or packaging materials, on business paper or for
advertising goods or services constitutes infringement.  In the case of word marks, even spoken use of
the words can constitute infringement.
235  No data on infringement cases were available, as the
authorities state that the Trade Marks Registry maintains no centralized records.
170. Minimum penalties of a six-month imprisonment term and Rs 50,000 have been prescribed
for trademark violations.  The maximum penalties have been increased from two-years imprisonment
to three years and a fine of Rs 2 million.  No data were available on seizures at borders, or penalties
imposed.
171. Police officers (not below the rank of Deputy Supt. of Police) are empowered to search and
seize without warrant the goods, dies, blocks, machines, plates, or other instruments used to committhe offence.  However, an officer is obliged to obtain an opinion of the Registrar of Trade Marks on
the facts involved in the offence.
(c) Geographical indications
172. The Parliament of India enacted the Geographi cal Indications of Goods (Registration and
Protection) Act, 1999 on 30 December 1999.  Applications for geographical indications of goods arereceived at the Geographical Indications Registry.  The Controller General of Patents, Designs and
Trade Marks is the Registrar of geographical indications.  A geographical indication may be
registered for all goods originating in a definite terr itory of a country, or a region or locality in that
territory (Article 8).  Goods that cannot be registered as a geographical indication include:  those
which are likely to deceive or cause confusion;  those which could be contrary to law;  those whichcontain scandalous or obscene matter;  those which comprise any matter likely to hurt religious
susceptibilities;  or those which are determined to be generic names or indications in their country of
origin.
236  Moreover, nothing in the Act shall apply in respect of a geographical indication with
respect to goods or classes of goods for which such geographical indication is identical with the form
                                                     
234 Registration used to be for seven years.
235 IndiaIP.com news services, "New Trade Marks Act still not notified – Rules being framed"
[Online].  Available at:http://www.indiaip.com/main/news/inida/09may03.htm [26 April 2001].
236 "Generic names or indications" in relation to goods, means the name of a good which, although it
relates to the place or the region where the goods were originally produced or manufactured, has lost its original
meaning and has become the common name of such goods and serves as a designation for or indication of thekind, nature, type or other property or characteristic of the goods.  In determining whether the name has becomegeneric, account shall be taken of all factors including the existing situation in the region or place in which thename originates and the area of consumption of the goods (Article 9).India WT/TPR/S/100
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customary in common language as the common name of such goods in any part of India on or before
1 January 1995 (Article 26(2)).
173. Applications to register a geographical indica tion must be in writing to the Registrar and
accompanied by the required fees.  The Registrar is in charge of examining each application, and
accepting or refusing it.  In case of refusal the grounds should be stated in writing.  If the application
is accepted it has to be advertised.  Any person may oppose the registration within three months of theadvertisement.
237  No geographical indications have as yet been registered nor are there any pending
registrations.
174. Registration of a geographical indication is for ten years with possible renewal for a further
ten-year period.  Registration for an authorized user is also for ten years or until the date at which the
registration of the geographical indications expires, wh ichever is earlier.  An authorized user has the
exclusive right to use the geographical indication.  Geographical indications, or authorization to use
them, might be removed due to failure to pay fees.  Registration gives the proprietor and the
authorized user or users the right to obtain the re lief specified in the Act in case of infringement.
175. India considers that the additional protection for geographical indications under Article 23 of
the TRIPS Agreement should be extended to products other than wines and spirits.  Relevant productsof export interest to India are, for example, Basmati rice, Darjeeling tea, Alphonso mangoes, and
Kohlapuri slippers.
238  In India, the Central Government has the discretion to specify that certain
goods or classes of goods require additional protection (Article 22(2)).  In this case the use of
expressions such as "kind", "style", "imitation" is considered an infringement (Article 22(3)).
176. Infringement occurs when an unauthorized person uses a registered geographical indication
either by indicating or suggesting that such goods originate in a geographical area other than the true
place of origin, or uses any geographical indication in a manner that constitutes an act of unfaircompetition.
239  The falsification of geographical indications, the representation of a geographical
indication as registered, and the sale of goods with a false geographical indication, are subject to
penalties of imprisonment of six months to three years, and to fines of Rs 50,000–200,000.  If the
offender is a company, the company as well as every person in charge of its management are
considered guilty.  No data are available regarding infringement, seizures or penalties imposed.
177. To provide information to the consumer, th e Central Government may require that the
country or place of origin is indicated on goods imported into India (Article 71(1)).  This requirement
may be imposed if a dealer, manufacturer, producer, or user of the goods concerned requests it;  or if
the Central Government is convinced that it is n ecessary in the "public interest" (Article 71(3)).
                                                     
237 A geographical indication may not be registered as a trade mark.  Nevertheless, if a trade mark
contains or consists of a geographical indication and ha s been registered under the Trade Mark Law before the
enactment of the Geographical Indication Act, the trade mark should remain valid until it expires (Article 26).
238 India has presented or co-sponsored several papers regarding this issue to the Council for TRIPS, as
well as proposals for the 1999 Ministerial Conference regarding this issue (WTO documents IP/C/W195, 196,204/Rev.1, 247/Rev.1, and 308/Rev.1, July 2000–May 2001).
239 An "act of unfair competition" means any act of competition contrary to honest practices in
industrial or commercial matters (Geographical Indication Act, p. 10).WT/TPR/S/100 Trade Policy Review
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(d) Copyright
178. The Copyright Act of 1957 was last amended in 1999.  Copyright is provided to original
literary240, dramatic, musical, and artistic works, cinematographic films, and sound recordings;  the
Act also provides broadcast reproduction rights to broadcasters (Section 37) and performers
(Section 38).  Copyrights are granted if the work was first published in India or if the author was an
Indian citizen;  in the case of unpublished works, the author has to be a citizen of India or domiciledin India at the time that the work was done;  architectural works are protected if located in India.
National treatment to foreign works is provided unde r Articles 40-43 of the Copyright Act, where the
Government, through an International Copyright Order, extends protection to nationals or
organizations of countries that are members of international copyright conventions to which India is
also a party (Berne Convention, Universal Copy right Convention, Phonograms Convention, and the
WTO).
241  The International Copyright Order is amended from time to time to update the list of
countries to which it applies;  it was most recently updated in 2000.242  However, if the Central
Government suspects that adequate protection is not given to Indian authors in a specific country,
India does not grant protection to the nationals of that country (Article 42).  This provision has not
been applied according to the authorities.
179. Copyright protection for published literary, dramatic, musical, and artistic works (other than
photographs) is for the author's lifetime plus 60 years (Section 22).  Anonymous and pseudonymous
works are protected for 60 years from the year fo llowing their first publication (Section 23), the same
protection period is granted for photographs, cinematographic films, and records (Section 25-26).  A
broadcast reproduction right is granted for 25 years from the beginning of the calendar year following
the year of the broadcast (Section 37);  performers rights are granted for a period of 50 years (Section
4 of the Copyright (Amendment) Act, 1999).
180. Compulsory licences may be issued if work is withheld from the public (Section 31), and if an
author of an "Indian work" is dead or unknown or a copyright owner cannot be found.243  In such an
instance, anyone may apply to the Copyright Board for a licence to publish or translate the work.
Moreover, seven years after first publication, anyone may apply to the Copyright Board for a licence
to produce and publish a translation of a literary or dramatic work (Section 32).  The Copyright Boardmay advise the Copyright Registrar to grant a compulsory licence under certain conditions.
244
181. The law stipulates which acts constitute an infringement of a copyright but also includes an
extensive list of acts that do not constitute an infringement.  This list was extended in 1999 to include
further exceptions to the protection of computer programs, namely;  the decompilation of computer
programs;  the reproduction of programs to observe their functionality;  and the making of multiplecopies and adaptation of programs for non-commercial personal use (Section 7).
                                                     
240 Literary works includes computer programs, tables, and compilations including computer data bases
(Article 2).
241 These are the Berne Convention, the Universal Copyright Convention, and the Phonograms
Convention (International Copyright Order, 24 March 1999 amended by the International Copyright
(Amendment) Order, 12 December 2000).
242 The first International Copyright Order was issued and came into force in January 1958.
243 The Act defines "Indian work" as:  an artistic work authored by an Indian citizen;  and a
cinematographic film or sound recording made or manufactured in India (Article 31).
244 The conditions include:  proof by the applicant (to the satisfaction of the Board) that a request to the
copyright holder to reproduce and publish such works had been made and denied, or that the holder could not be
traced;  and that the applicant is competent to produce and publish the work at a price reasonably related to the
price normally charged for similar works, as fixed by the Board.  The licence may not be granted unless acertain period has expired (six months for works of the natural or physical sciences, mathematics or technologyand three months for all others) between the gr ant of copyright protection and the application.India WT/TPR/S/100
Page 95
182. Infringement of copyright is punishable with penalties of imprisonment of six months to
three years and fines between Rs 50,000 and Rs 200,000.  The police (not below the rank of
Sub-inspector) can seize, without a warrant, all infringing copies of a work and all the materials
("plates") used to make the infringing copies;  a ll such seized material must be produced before a
magistrate as soon as possible.  The minimum jail term is doubled to one year and the minimum fine
increased to Rs 100,000 for a second or subsequent offence.  "Use" of an infringing computerprogram now carries a minimum jail term of se ven days and a minimum fine of Rs 50,000.  No
centralized records are maintained regarding the in fringement of copyrights, seizures, or penalties
imposed.  However, according to the National Crimes Records Bureau (NCRB) in 2000 there were
1,211 cases of copyright infringement and the value of seizures amounted to some Rs 82.6 million.
183. India's copyright legislation is generally strong, but enforcement is inadequate to deal with
piracy (Table III.18).
245  The major obstacles are lack of resources and an overcrowded and ineffective
court system that prevents the conclusion of cases.  In addition, according to a study on copyright
piracy commissioned by the Ministry of Human Resource Development, the police often lack the
required knowledge to enforce the copyright legislation.  Piracy pervades all the copyright industries
both domestic and international.  For instance, according to the International Intellectual PropertyAlliance, the piracy rates of Indian motion pictur es remains high, around 80%;  however, the rate for
foreign films has dropped somewhat.  Piracy of software in India has also declined, from 78% in 1995
to 63% in 2000;  it is concentrated in the end- users category with major Indian companies not
purchasing legitimate software.  A further reduction in piracy would only benefit India's software
industry, which is the world's largest producer of business software applications.  Regarding books, it
has been estimated that for each genuine copy sold in India, four unauthorized copies are sold.
Enforcement at the border also seems to be weak.
246
Table III.18
Estimated trade losses due to piracy and levels of piracy, 1995-00(US$ million and per cent)
Industry 1995 1996 1997 1998 1999 2000
loss level
(%)loss level
(%)loss level
(%)loss level
(%)loss level
(%)loss level
(%)
Motion pictures 58.0 99 66.0 85 66.0 80 66.0 80 66.0 80 47.0 60
Sound recordings/musical compositions10.0 30 7.0 30 6.0 40 6.0 30 8.0 40 6.0 40
Business software
applicationsa114.6 78 182.4 78 148.7 69 158.0 65 160.2 61 195.2 63
Entertainment softwareb25.8 76 31.4 78 35.9 82 36.8 84 42.8 86 .. 80
Books 25.0 .. 25.0 .. 22.0 .. 30.0 .. 35.0 .. 36.0 ..
Total 233.4 - 311.8 - 278.6 - 296.8 - 312.0 - 284.2 -
.. Not available.
-N i l .
a BSA loss numbers for 2000 are preliminary.
b IDSA estimates for 2000 are preliminary.
Source: International Intellectual Property Alliance.
                                                     
245 USTR (various years).
246 International Intellectual Property Alliance (various years).WT/TPR/S/100 Trade Policy Review
Page 96
184. While acknowledging that piracy is of concern, the Government suggests that rates of piracy
have declined.247  Nevertheless, enforcement is being stepped up.  The Government has established a
Copyright Enforcement Advisory  Council (CEAC) based in the Ministry of Human Resource
Development to advise the Government on enforcement;  the Council includes representatives of the
administration, industries for which copyright enforcement is important, heads of police forces in the
states and other concerned central government ministries.  State governments have also been advisedto establish special police cells to handle IPR enforcement issues.  In addition, a public education
programme has been launched to improve awareness of intellectual property rights.
(e) Industrial designs
185. The Designs Act, 2000 replaced the Designs Ac t, 1911, for protection of industrial designs.
Applications to register a design must be filed with the Patent Office.
248  Prior to registering the
design, the Controller refers the application to an examiner.  The Controller may refuse to register any
design if its use could be contrary to public order or morality;  any person aggrieved by such refusal
may appeal to the High Court.  After registration, the design has to be published and open to public
inspection.  The Patent Office keeps a registry of designs.249
186. Designs are protected as a copyright for a period of ten years, renewable for a further five
years.  The registration of a design may be cancelled at any time if the design has been previously
registered or published in India;  or in any other country prior to the date of registration;  or if it is not
a new or original design;  or if it is not a design.  Since 1998, 16 designs have been cancelled because
they had previously been registered in India or had been published prior to the date of registration.
The owner of a design may at any point assign a licence to someone else for the use of the design.
187. Piracy of a registered design is punishable with a fine of Rs 25,000-50,000 payable to the
registered proprietor.  Piracy is defined as a fraudulent imitation, importation of any article that has afraudulent imitation of a design, or the sale of an article containing a fraudulent design.  No data on
infringement cases were made available to the Secretariat since the authorities state that no centralized
records are maintained for this purpose.
(f) Semiconductor integrated circuits layout-designs
188. The Semiconductors Integrated Circuits Layout-Design Act, 2000 was enacted on
4 September 2000 to give effect to Section 6, Article 35 of the TRIPS Agreement.  However,
protection seems to be weak with many loopholes  and broad compulsory licensing provisions.
189. Applications to register a layout-design should be made in writing to the Registrar and filed at
the office of the Semiconductors Integrated Circuits Layout-Design Registry.  The Registrar may
                                                     
247 A detailed study conducted by the National Productivity Council, commissioned by the Ministry of
Human Resource Development puts the figure at some 20% in 1996/97;  the estimates, however, exclude keysectors, namely cinema, software exports and print media (National Productivity Council, 1999).
248 A design may not be registered if:  it is not new or original;  or it has been disclosed to the public
anywhere in India or in any other country by publication or has been used prior to the filing date, or it is notsignificantly distinguishable from known designs or a combination of known designs;  or it comprises or
contains scandalous or obscene matter (Article 4).
249 Members of the Paris Convention or parties to the TRIPS Agreement enjoy a priority right for the
registration of a design in India, provided that the application is made within six months of the date ofapplication in another member country;  but the proprietor may not recover damages for piracy that occurredprior to the date on which the design was registered in India (Article 44).India WT/TPR/S/100
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refuse an application, accept it absolutely, or subject it to amendments.250  If an application is accepted
the Registrar must publish it within 14 days.  Opposition to registration must be filed within
three months of the advertisement.  Foreign nationals may also oppose a registration even if they do
not reside in India.  Applications may be amende d at any time;  when there has been no opposition to
the application for registration, or this has not been accepted, the registration of the layout-design is as
of the date of the application.
190. Registration is for a period of ten years, from the date the application was filed or from the
date of first commercial exploitation in India or anywhere else, whichever is earlier.  The registration
of a layout-design gives the registered owner the exclusive right to its use and to obtain relief in case
of infringement.  No person may institute proceedings to prevent or to recover damages for the
infringement of unregistered layout-designs (Article 16).
191. Infringement of a layout-design refers to:  the reproduction of a registered layout-design;  or
the importation, sale, or distribution for commercial purposes of a registered layout-design (unless the
person is unaware of the act).  However, layout-designs may be reproduced for scientific evaluation,
analysis, research, or teaching.  If a person creates, another original, layout-design on the basis of
scientific evaluation or analysis of a registered layout-design that person has the right to reproduce,sell or incorporate this layout-design in a semiconductor, and this will not be considered to be an
infringement.  In addition, if by application of i ndependent intellect someone creates a layout-design
that is identical to a registered one, that person may use it as desired without infringing
(Article 18(8)).  According to the authorities this has never occurred.
192. A registered layout-design right may be assigned and transmitted with or without the owner's
approval.  The authorities noted that this has not been the case so far.  If the registration of a layout-
design is prohibited, or the assignment or transmission is contrary to law, anyone may apply to theAppellate Board for the cancellation of the registration or of the assignment or transmission
(Article 42).  However, this has not occurred.
193. A person other than the registered proprietor may be registered as the user of the
layout-design.
194. The infringement of a layout-design right is punishable with imprisonment for up to
three years or with fines of Rs 50,000-1 million.  If a person is convicted for infringement,
merchandise may be seized.  The authorities state that there have been no cases of infringement of
layout-designs since 1998.
                                                     
250 A layout-design that is not original, or that has been commercially exploited anywhere in India or in
any country that affords to Indian citizens similar privileges as granted to its own citizens (Article 93);  or that isnot inherently distinctive;  or that is not inherently capable of being distinguishable from any other registeredlayout-design may not be registered as a layout-design.