India WT/TPR/S/33
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III. TRADE POLICIES BYMEASURE
(1) Overview
1. Over thepastfouryears, India'strade policy hasshown amixed record. While India has
continued tolower thesimple average tariff, thenumber oftariff items subject torestrictive licensing
remains extensive. Thebeginning ofatendency towards export-orientation, asopposed tooutward
orientation, canbeseenastheextensive incentives given toexporters havenotbeenreduced intandem
withtheliberalization oftheimport regime. Amore neutral policy stance would bemore likely to
maximize thebenefits from trade reform.
2. Thesimple average tariffhasfallen from71percentin1993/94 to35percent,andtarifflevels
onparwiththeASEAN countries areenvisaged bytheauthorities bytheyear2000. However,
substantial tariffdispersion continues toexist, andindeed thevariation inrateshasincreased somewhat
sinceIndia'slastReview; thenumber oftariffs isalsofairly high, at22.Tariff escalation byprocessing
stage remains significant, thereby providing higher levels ofeffective protection togoods astheyare
further processed. Asaresult oftheUruguay Round, Indiabound awiderange ofproducts, equivalent
toabout twothirds ofalltariff lines. Thebound rates, areoften atceiling levels, above prevailing
applied rates.
3. About 32percentofalltariff linesaresubject tolicensing, which, formostofthem, actas
import bans. India isgradually liberalizing itsimport restrictions through movement ofitems from
restricted status tothelistoffreely importable goods, often through thefreely transferable Special
Import Licenses (SILs). Todate,thisprogramme hasconcentrated largely oncapital goods andinputs
toindustry. Aphase-out programme forremaining restrictions hasbeenpresented totrading partners
andagreement hasbeenreached withallmajor partners except theUnited States.1Inaddition, India
continues tocontrol imports andexports by,interalia,theuseofstate-trading monopolies (canalization);
theshare ofcanalized imports asapercentage oftotalimports hasdeclined since theperiod covered
bytheprevious Review.
4. Although direct export subsidies arenotprovided toexporters, India relies onawiderange
ofindirect subsidies, including exemption from income tax;export finance atbelow-market interest
rates; guaranteed access toaminimum of10percentofcommercial banknetcredit; export insurance
andguarantees provided bygovernment-owned agencies; access toawiderange ofexport promotion
andmarketing assistance schemes; andimport access torestricted items. Nophase-out planhasbeen
announced fortheassociated performance requirements, which arelinked toexport obligations, net
foreign exchange earnings and/or value added.
5. Since itsprevious Review, India'santi-dumping andcountervailing lawshavebeenbrought
intolinewithitsWTO obligations. Anewlawoncopyrights hasbeenenacted, while forother
amendments ofitsintellectual property rights lawsIndia intends tomake useofthefive-year transition
period granted todeveloping countries.2Theamended customs valuation lawhasraised some concern
within theWTO Committee onCustoms Valuation andfurther clarification fromtheIndian authorities
1On1April 1997 around 10percentofalltariff lineswereontheSILList,compared to7.5percentoneyear
before.
2India, asadeveloping country Member, isgranted anadditional fiveyears from thedateofapplication of
theAgreemen t,toextendproductpatentprotectiontoareasoftechnologynotsoprotectable,suchaspharmaceu tical
andagricultural chemicals.WT/TPR/S/33 Trade Policy Review
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hastherefore beenrequested. Local-content schemes have, ingeneral, beenphased out.Inthearea
ofstandards, thegeneral policy hasbeen, according totheauthorities, atwo-pronged approach: bringing
Indian standards uptointernational levels, aswellasaharmonization between thestandards ofIndian
States. India, which hasnotsigned theWTO Agreement onGovernment Procurement, lacks separate
statutory guidelines ongovernment procurement although some progress hasbeenmade insimplifying
procurement procedures andmaking them more transparent.
6. Intheareaofmeasures affecting production andtrade, attempts tosimplify India'sextensive
industrial policy measures havecontinued sinceitslastReview. Reforms include, interalia,areduction
(from 18to9product categories) ofthenumber ofindustrial licensing controls, adecrease from(836to
821items) inthenumber ofareas reserved forthesmall-scale sector, andabolition ofprice controls
forsome pharmaceutical products. Some progress hasalsobeenmade inpublic sector reforms although
government disinvestment inpublic sector enterprises hasbeenslow. Anumber ofinterventions, such
asprice controls, credit requirements forcertain priority sectors, andahighlevel ofsubsidies
(14percentofGDP in1994/95) remain.
(2) Measures Directly Affecting Imports
(i) Registration anddocumentation
7. Mostimporters(likeexporters)mustregisterwiththeDirectorGeneralofExternalTrade(DGFT)
toobtain anImporter-Exporter Code (IEC) number. Importers exempt fromthisrequirement arethose
covered byClause 3(1)(except subclauses (e)and(l))oftheForeign Trade (Exemption fromApplication
ofRules inCertain Cases) Order, 1993; Ministries andDepartments; persons importing goods for
theirpersonal use,notconnected withtradeormanufacture oragriculture; andpersons importing goods
from Nepal orMyanmar (provided thec.i.fvalue doesnotexceed Rs25,000).3
8. Theapplication foranIECnumber mustbesupported byacertificate fromthebanker ofthe
applicant firm, intherequired form, andafeeofRs1,000. TheDGFT maysuspend orcancel the
registration ofanyregistered importer who, intheview oftheDGFT, hasengaged incommercial
transactions causing severe harm toIndia'sexternal trade relations.
9. Anytrader wishing toclaim replenishment/Special Import Licence (SIL) orimport licences
related toexport obligations liketheDutyExemption Scheme (DES) ortheExport Promotion Capital
Goods (EPCG) scheme, isrequired tofurnish aRegistration-cum-Membership Certificate (RCMC),
issuedbytherelevantauthorities(suchasExportPromotionCouncilsandFederationofIndianExporters
Organizations) orbytheregional licensing authority. AnRCMC isrequired forclaiming animport
licence forarestricted good (ontheNegative ListofImports). Licence application feesarecharged
according tothevalue ofimports tobemade; ratesinApril 1997ranged fromRs200toRs150,000.4
There isnodeposit oradvance payment requirement associated withtheissue ofanimport licence
forrestricted goods.
3Government ofIndia (1997d), Chapter IV.
4Sixadditionalfeesmaybelevied:applicationforduplicatelicence(Rs200);SpeedPost(Rs200);application
foranidentitycard(Rs200);applicationforaduplicateIdentityCardintheeventoflossoforiginalcard(Rs100);
extensionoftheperiodofshipmentofanimportlicence(Rs200);andapplicationforasplit-licence(Rs1,000per
licence).India WT/TPR/S/33
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10. Other documents required upon importation are: (i)shipping documents; (ii)commercial
invoices; (iii)ifrequired, certificates oforigin5;(iv)analytical testreport incaseofchemicals, metals,
etc.; (v)Chartered Engineer 'sCertificate incaseofsecond-hand plant andmachinery; and
(vi)catalogue, literature onitsusage incaseofmachinery, equipment, etc.
(ii) Customs valuation, clearance andinspection
11. India'slegislation oncustoms valuation, theCustoms Valuation Rules, 1988, hasbeenamended
sincethecompletion oftheUruguay Round, tobring itintoconformity withtheprovisions oftheWTO
Agreement onImplementation ofArticle VIIofGATT 1994, theCustoms Valuation Agreement.6
However, India invoked thespecial provisions fordeveloping countries under theAgreement relating
tocomputed value andunitprice oftheimported goods.7
12. Under Indian legislation, transaction value isthebasisforcustoms valuation. Thetransaction
value isdefined asthepriceactually paidforthegoods when soldforexport toIndia, adjusted toreflect
some costsandservices incurred bythebuyer.8Some WTO Members haveraised concerns regarding
therules fortheestimation oftransportation costs, loading, unloading andhandling charges and/or
insurance inthecases when these arenotascertainable. Insuchinstances aspecified percentage of
thef.o.b. value oftheimports isusedinthecalculation ofcostandservices.9According tothe
authorities, theprovision ofafixed percentage hasbeenmade fortransparency purposes. Further
clarification ofthese provisions wererequested fromtheIndian authorities, andpending thistheWTO
Committee onCustoms Valuation hasnotyetconcluded itsexamination oftheIndian legislation.
13. Since India'slastTrade Policy Review in1993, thegreen channel facility forcustoms clearance
hasbeenenhanced. Large established exporters withagoodtrackrecord receive expeditious assessment
oftheirimport BillsofEntry byagroup ofappraisers andassistant collectors especially earmarked
forthispurpose.10Facilities forde-stuffing containers areprovided bytheCentral Excise Officers
atthefactory premises ofthelarge established exporters whoaremanufacturers/importers. The
containers aremoved straight fromtheporttothefactory.11On-line assessment andclearance through
Electronic DataInterchange (EDI) hasbeenstarted atDelhi andislikely tobeextended toallother
Customs Stations bytheendof1998. Forfacilitating customs clearance, theimporter canfiledocuments
forclearance 30daysinadvance oftheexpected dateofarrival ofavessel. Exports ofperishable
goods havebeenexempted fromroutine customs examination. Further, tofacilitate imports, alarge
5WTO document G/LIC/N/3/IND/1, 23January 1996.
6Amended bynotification No.26/95, 24April 1995.
7WTO document G/VAL/6, 10January 1996.
8Thecostsandservicesinclude,interalia,commissionsandbrokerage,exceptbuyingcommissions;containers;
packing; goods andservices foruseinconnection withtheproduction andsaleforexport ofimported goods
suchasmaterials components, tools andengineering work; royalties andlicence fees; transportation; loading,
unloading andhandling charges; andinsurance.
9WTO document G/VAL/M/3, 24June 1996.
10Large established exporters include Trading Houses, StarTrading Houses, Super StarTrading Houses and
Export Houses.
11Government ofIndia (1997d), Chapter IV.WT/TPR/S/33 Trade Policy Review
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number ofInland Container Depots andContainer Freight Stations havebeencreated inthehinterland
areas forcustoms clearance ofimport andexport cargo attheplace ofproduction/consumption. The
Goods Imported (Conditions ofTranshipment) Regulation, 1995, contains provision forfacilitating
movement ofimported goods. Import ofcargo bycourier hasbeenprovided forthrough theCourier
Import (Clearance) Regulation, 1995. TheMultimodal Transport Acthasalsobeenframed withthe
objective ofproviding guidelines fortheexpeditious movement ofcargo.
14. In1993, according totheauthorities, about 70percentofimported cargo atmajor customs
houses wascleared within threedaysofalldocuments being submitted; asimilar situation nowprevails.
15. Appeals procedures arelaidoutinChapter XVoftheCustoms Act,1962. Appeals byimporters
concerning valuation andprocedures maybeaddressed totheCommissioner (Appeals) within three
months ofthedateofcommunication oforders passed bytheofficers dealing withclearance ofgoods.
Theimporter mayalsolodge judicial appeals, within three months, totheCustoms, Excise andGold
(Control) Appellate Tribunal. TheTribunal mayhearappeals against orders anddecisions passed by
theCommissioner (Appeals) onallcustoms issues, except those related tobaggage, short-landing and
duty-drawback payment. Decisions taken bytheTribunal canbeappealed totheSupreme Court.
Theappeals incasesrelated tobaggage, shortlanding anddutydrawback maybefiledbefore theCentral
Government. Thetotalnumber ofappeals byimporters totheCommissioner ofAppeals was48,581
in1996, ofwhich 25,351 (or52percent) ofcases were settled.
16. Preshipment inspection ofimports isgenerally notrequired inIndia. Inthecaseofsecond-hand
capital goods, theimporter isrequired to,interalia,furnish toCustoms, atthetimeoftheclearance
ofgoods, acertificate from Chartered Engineers. Preshipment inspection certificates are,however,
required forimport ofmetal scrap originating from acountry affected byrebellion orwar.
(iii) Tariffs andadditional duties
(a) Structure
17. There arefivedifferent ratesintheIndian tariff structure:
-basic rates,which canonlybechanged bylegislation, arestatutory m.f.n. tariffs;
-preferential arearates,which areapplicable toimports from thedeclared "preferential
areas" ofMauritius, Seychelles, andTonga. Other country preferences areprovided by
India under bilateral andplurilateral agreements (section (i)below);
-additional duties (i.e.countervailing duties intheIndian nomenclature) corresponding to
excise taxes onsimilar, domestically produced goods. These duties donotgivedomestic
producers additional protection12;
-aspecial rateof2percentapplied toallimports, except goods thatarecompletely exempt
fromthebasic rates, wasintroduced inthe1996/97 budget. On16September 1997, the
ratewasincreased to5percentformostimports; imports subject toaspecial rateofonly
2percentinclude crude petroleum andpetroleum products (HSChapters 27.09 to27.15);
12The"additional" dutyhasbeen excluded from thetariff analysis since itisneutral initsimpact between
domestically made andimported products andtherefore hasnoprotective effect.India WT/TPR/S/33
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project imports (HSChapter 98.01); and31other items attheHS-six digit level.13
Parliamentary approval isuntil31March 199914;and
-theIndian tariff structure alsocontains awiderange oftariff exemptions. Thebasic rate
maybereplaced byoneofseveral concessional rates(section (e)),someofwhich aregranted
toallimporters while others areconditional. Inaddition, anumber ofconcessional schemes
grant partial orfullexemption ofduty.15Concessional ratescanbeadministratively fixed
bytheGovernment, andannounced through public notifications intheOfficial Government
Gazette, without legislative assent, though theyarerequired tobelaidbefore Parliament.
Changes intariff require prior approval ofParliament.
18. TheclassificationofcustomstariffsinIndiaisbasedontheHarmonizedCommodityDescription
andCoding System (HS); asof1April 1997, theIndian tariff had5,134 tariff linesclassified atthe
HSsix-digit level. Indiagrants atleastm.f.n. treatment toimports fromalltrading partners, including
countries notmembers ofWTO.
(b) Form oftariffs
19. Almost allofIndia'stariffs areadvalorem based, some 99.8percentofthetariff linesas
of1April 1997. Composite duties (acombination ofspecific andadvalorem rates) areapplied to
ballandroller bearings.16
(c) Average tariff levels anddispersion
20. Since itslastReview, India haslowered itssimple average "effective" (i.e.applied) m.f.n.
tariff, exclusive ofadditional duties, from 71to35percent(Table III.1).17Substantial dispersion
ofeffective tariff ratescontinues toexist. Theindex ofdispersion, asmeasured bythecoefficient
ofvariation isashighas42percent,while thestandard deviation is15percent. Thenumber oftariff
13Finance Act(Amendment) Ordinance, 1997. Other major items subject toaspecial rateofonly2percent
include some alcoholic beverages; computers andtheirparts, ofHSheading 84.71; floppy discs andCD-ROMS;
andmicrophones andloudspeakers fortelecommunication use.
14Academy ofBusiness Studies (1997), page 107.
15According totheauthorities, theeffective rates resulting from concessional schemes havebeen builtinto
thetariff asfaraspossible (Table III.1); newconcessions below theHSsix-digit level arerare.
16However, therateonthetwotariff linescovering almonds isanadvalorem rateoraspecific rate,whichever
islower; thetariff analysis assumes theadvalorem rateapplies. Since 14May 1997, almonds-in-shell and
shelled-almonds attract aspecific rateofRs95/kg. andRS100/kg., respectively. Inexchange forincreases
initsquotas fortextiles andgarments intotheEuropean Union andU.S. markets, India agreed inseparate treaties
toacomprehensive liberalization ofthesector, including tariff ratesof20to40percentbytheyear2000. These
reformswillbeappliedtoallcountriesexportingtoIndia.Withintheframew orkoftheagreemen ts,Indiareserved
theright tovarythenegotiated maximum tariffs bylevying specific duties. (Pursell, 1996.)
17Inthefollowing section, theeffective ratehasbeen calculated byadjusting thebasic rates forexemptions
andconcessions. However, concessional rates thatareonlyapplied toapartoftheHSsix-digit lineorextended
toaspecific producer, have notbeen incorporated intotheeffective rate.WT/TPR/S/33 Trade Policy Review
Page 46
bands ishigh; 22,ranging from0to260percent. Thedistribution ofeffective ratesisskewed towards
ratesbetween 20and45percent, which cover 90percentoftariff lines(Chart III.1).18
Table III.1
Tariff structure ofIndia 1990/91 to1997/98
(Percent)
1990/91a1993/94b1995/96 1996/97c1997/98d
BasiceEffe.fBasiceEffe.fBasiceEffe.fBasiceEffe.fBasiceEffe.f
Av.unweighted
Agriculture 134 113 83 43 ... 27 29 26 26 26
Mining 127 100 85 70 ... 30 26 26 27 25
Manufacturing 145 126 85 73 ... 42 40 40 36 36
Whole economy 144 125 85 71 ... 41 39 39 35 35
Index ofdispersiong35 32 17 42 ... 47 47 49 41 42
1990/91 1993/94 1995/96 1996/97 1997/98
Max. tariff rateh355 85 50 52 45
Av.weightedi87 47 25 22 20
... Notavailable.
a Prior tothereform package ofJuly1991. Includes auxiliary dutymostly at45percent.
b Theauxiliary dutywasmerged withthebasic customs dutyinthe1993/94 budget.
c Includes special rateof2percent.
d Includes special rateof5percent.
e Basic m.f.n. rate,i.e.,thestatutory rateswithout adjusting forthelower tariffs applied through exemption notifications.
f Effective m.f.n. rate,i.e.,actual ratesapplied where basic rateshavebeenreduced byexempt rates. However, many exempt
ratescannot beincorporated suchaswhere theexempt rateapplies toonlyapartoftheHSsix-digit tariff line. Theeffective
ratealsoexcludes specific exemptions.
g Index ofdispersion forthewhole economy asmeasured bythecoefficient ofvariation, percentage points.
h Higher thantheso-called maximum rateisapplied toafewitems; in1997/98, 0.4percentoftariff lines.
i Weighted by1992/93 import values.
Note: Tariff averages consider onlythose tariff lineswithadvalorem rates. Year beginning 1April.
Classification usedisbased ontheInternational Standard Industrial Classification (ISIC): Agriculture =ISIC1,Mining =ISIC2,
Manufacturing =ISIC3,including foodprocessing.
Source: WTO Secretariat calculations based onAcademy ofBusiness Studies (1997), EasyReference Customs Tariff 1997/98; World Bank
(1997a), India 1997 Economic Update: Sustaining Rapid Growth; anddataprovided bytheWorld Bank.
21. Thesimple average effective tariffissubstantially higher inmanufacturing thanforagriculture
ormining. Theaverage effective rateforimports ofmanufactured products is36percentin1997/98,
down from 73percentin1993/94, while theaverage tariff foragricultural imports is26percent
in1997/98, compared with43percentin1993/94 (Table III.1). Effective tariffs attheHStwo-digit
level areprovided inTable AIII.1. Under anISIC-two digitclassification, thetariff profile shows
apeakof44percentfornon-metallic mineral products (ISIC-36); andimports oftextile, wearing
apparel andleather industries (ISIC-32) haveaneffective average rateof42percent(Chart III.2).
18Aratehigherthanthestatedmaximumtariffisappliedtoafewproducts(23tarifflines)including,interalia,
some alcohol products (tariff of262percent); anddried grapes (127 percent).India WT/TPR/S/33
Page 47
WT/TPR/S/33 Trade Policy Review
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22. TheGovernment istocontinue tariff reform, withthestated aimofprogressively reducing
andharmonizing tariffs. Tariff levels onparwiththose oftheASEAN countries areenvisaged by
theturnofthecentury andatglobal levels by2003.
(d) Tariff escalation
23. Throughout the1990's,India'stariffs havebeenlower onunprocessed goods thanonsemi-
processed orfinalgoods, thereby maintaining higher levels ofeffective protection tothemanufacturing
sector thanthatreflected bythenominal rates(Table III.2). Thesimple average tariffonfullyprocessed
goods, acategory covering 50percentofthetariff lines, is37percent. Imports ofsemi-processed
products faceanaverage tariff of35percent. Primary products, acategory covering 12percentof
thetarifflines, havethelowest ratesofthethreeprocessing categories, withanaverage of25percent.
Significant tariffescalation isdisplayed inthefollowing industries: paper andpaper products, printing
andpublishing; wood andwood products; andfood, beverages andtobacco (Chart III.3).
Table III.2
Tariff byprocessing stage, 1990-98
(Percent)
1990/91a1993/94b1995/96 1996/97c1997/98d
BasiceEffe.fBasiceEffe.fBasiceEffe.fBasiceEffe.fBasiceEffe.f
Av.unweighted by
stage ofprocessing
Unprocessed 128 107 83 50 ... 27 27 25 26 25
Semi-processed 148 122 85 75 ... 44 39 38 36 35
Processed 144 130 86 73 ... 43 42 42 37 37
... Notavailable.
a Prior tothereform package ofJuly1991. Includes auxiliary dutymostly at45percent.
b Theauxiliary dutywasmerged withthebasic customs dutyinthe1993/94 budget.
c Includes special rateof2percent.
d Includes special rateof5percent.
e Basic m.f.n. rate,i.e.,thestatutory rateswithout adjusting forthelower tariffs applied through exemption notifications.
f Effective m.f.n. rate,i.e.,actual ratesapplied where basic rateshavebeenreduced byexempt rates. However, many exempt
ratescannot beincorporated suchaswhere theexempt rateapplies toonlyapartoftheHSsix-digit tariff line. Theeffective
ratealsoexcludes specific exemptions.
g Measured bythecoefficient ofvariation, percentage points.
Note: Tariff averages consider onlythose tariff lineswithadvalorem rates. Year beginning 1April.
Source: WTO Secretariat.
24. Asimilar pattern isfound bytheWorld Bank where products aredivided intoconsumer,
intermediate andcapital products.19Theimport-weighted tariffforcapital goods hasbeenhigher than
fortheimport-weighted tariff forintermediate goods throughout the1990s (Table III.3).
19World Bank (1997a).WT/TPR/S/33 Trade Policy Review
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26. Concessionaldutyschemesarebasicallyoftwotypes:(i)thosetargetingexporters;and(ii)those
providing exemptions foracommodity usedforaspecific purpose (i.e.end-use provision), thereby
exempting onlyaportion ofthetariff line. Schemes under theformer category include theDuty
Drawback scheme, which compensates exporters forcustoms tariffs ontheirimported inputs afterthe
exports have been undertaken; theDuty Exemption scheme (advance licence), which offers duty
exemptions oninputs prior toimporting; andtheExport Promotion Capital Goods (EPCG) scheme,
which provides exporters withaccess toforeign capital goods atreduced rates. Schemes forspecific
producers (i.e.exporters ofdiamonds, gems, jewellery, andsoftware) alsoexist. Performance
requirements arelinked toexport obligations, netforeign exchange earnings and/or value added to
befulfilled under aprescribed timeperiod; nophase-out planfortherequirements hasbeenannounced.
Thesalient features oftheconcessional dutyschemes areprovided inTable III.4andtheend-use
provisions arepresented inTable AIII.2. Dataarenotavailable ontheamount offorgone revenue
attributed tothese exemptions.
Table III.4
Keyfeatures oftheconcessional entry schemes inIndia
Scheme Eligibility Incentives Performance requirement
1.End-use tariff schemes: Awide range ofspecified
end-uses (Table AIII.3)Concessional dutyrange from
0to42percentonimportsNone
2.Export promotion capital
goods (EPCG) scheme:Manufacturer-exporters,
merchant-exporters tiedto
supporting manufacturer(s)
andservice providers10percentdutyoncapital good
(new orsecond hand)Export obligation offour
times c.i.f. value ofimports
under aperiod offiveyears
Asabove 0percentdutyoncapital good
(new orsecond hand) ifvalue is
Rs200million ormoreExport obligation ofsixtimes
c.i.f. value ofimports or
NFE offivetimes c.i.f. value
ofimports under aperiod of
eight years
Agriculture exporters andallied
sectorsa0percentdutyoncapital good
(new orsecond hand) ifc.i.f.
value isRs50million ormoreExport obligation ofsixtimes
c.i.f. value ofimports orNFE
offivetimes c.i.f. value of
imports under aperiod of
sixyears
3.aDuty drawback scheme: Anyexporter Based onindustry-average
drawback rates, refund of
customs dutypaidonimported
inputs usedinmanufactured
specified exports
3.bBrand ratefixation
scheme:Manufacturer-exporter Extends drawback ratesfor
individual exporters onparticlur
brands
4.Duty exemption scheme
(DES):
(1)advance licence Merchant-exporter or
manufacturer-exporter0percentdutyoninputs for
production ofexport; import is
allowed inaccordance with
standard input-output normsExport obligation varies and
value addition of33percent
under aperiod of1½years
(2)advance intermediate
licenceManufacturer andsupply ofinputs
toanother manufacturer-exporter
holding theadvance licence
mentioned aboveAsabove Asabove
Table III.4 (cont'd)India WT/TPR/S/33
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Scheme Eligibility Incentives Performance requirement
(3)special imprest
licenceManufacturer-exporter ofinputs
required inthemanufacture of
goods tobesupplied inthe
following categories:
(a)deemed exporters (seebelow)
incategory (2),(3)incaseof
dutyfreelicence, (4),(5),
and(6)
(b)sub-contractors todeemed
exporters (seebelow) in
category (4),(5),and(6)Asabove Export obligation varies and
value addition of33percent
under theperiod ofthe
execution oftheproject
(4)dutyentitlement
passbook schemeManufacturer-exporter and
merchant-exporter, andinthe
caseofpre-export basis withthe
supporting manufacturer having
export performance inthe
preceding three licensing yearsOnpre-export basis: duty
credits, which willallow imports
ofinputs dutyfree,of5percent
ofaverage f.o.b. exports
performance ofthepreceding
three licensing years;
onpost-exports basis: 0percent
dutyoninputsOnpre-export basis: export
obligation tobeoffset by
making exports under a
period ofoneyear;
onpost-export basis: not
applicable
5.Deemed exporters scheme
(DES):
(refers totransactions in
which thegoods supplied
donotleave thecountry)Goods tobesupplied tothe
following categories:
(1)Holder ofdutyfreelicences
under theDES
(2)Export oriented units, export
processing zones, software
technology parks orelectronic
hardware technology parksEntitled tothebenefits extended
under thespecial imprest
licence, theadvance intermediate
licence, andtheDDS
(seeabove)Supply ofgoods toeligible
categories
(3)Holders oflicences under the
EPCG scheme
(4)Projects financed by
multilateral orbilateral
agencies
(5)Supply ofcapital fertilizer
plants including spares up
to(10percentoff.o.r. value)
(6)Anyproject approved bythe
Ministry ofFinance
(7)Approved projects inthe
power, oilandgassector
6.Diamond, gemand
jewellery export
promotion schemes:
(1)replenishment licence Specific exporters ofgems and
jewelleryAllows imports ofselected
restricted items ofimportsOnpost-export basis
(2)diamond imprest
licenceImporter ofrough diamonds Asabove Export obligation of
65percentofreplenishmentb
under aperiod offivemonths
(3)DTC imprest licence Asabove Asabove Asabove
(4)bulklicence for
rough diamondsM/s. Hindustan Company Ltd,
Mumbai; MMTC Ltd,New
Delhi; andexporters whose
annual average f.o.b. value
ofexported cutandpolished
diamonds during thepreceding
three licensing years hasnot
beenlessthanRs750millionAsabove Supply min.90percentof
diamond production toholder
ofreplenishment licence and
diamond imprest licence, and
EOU andEPZunits.
Table III.4 (cont'd)WT/TPR/S/33 Trade Policy Review
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Scheme Eligibility Incentives Performance requirement
(5)schemes forgold,
silver, platinum
jewelleryExporters ofgold, silver,
platinum jewelleryAsabovecExport obligation period of
amaximum of150daysand
value addition between
10and25percentd
7.Export oriented units
(EOUs):Units exporting entire productione
inthefollowing areas:
manufacture, production of
software, agriculture andallied
sectorsa,andservices0percentdutyfVarying NFE (0to
60percent) andvarying
export obligation
8.Export processing zones
(EPZs):Asabove Asabove Asabove
9.Export Houses, Trading
Houses, StarTrading
Houses, Super Star
Trading Houses:Asabove Special Import License Varying export obligation
10.Software technology
parks:Software units exporting entire
production0percentdutyfVarying NFE (0to
60percent) andexport
obligation of1½times the
c.i.f. value ofimport plus1½
ofthewage bill
11.Electronic hardware
technology parks (EHTP):Asabove Asabove NoNFE requirement and
varying export obligation
a Allied sectors areaquaculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry, andsericulture.
b I.e.ifthelicence isfixed forac.i.f. value ofUS$65, thef.o.b. value ofexport obligation shallbeUS$100.
c Aquantity based advance licence maybegrated forduty-free import ofacertain quality ofgold, silver, platinum, mountings,
sockets andframes.
d 10percentforplanandplatinum jewellery andarticles thereof; 15percentforstudded gold/platinum jewellery andarticles thereof;
and25percentforsilver jewellery andarticles thereof.
e Rejects upto5percentofthevalue ofproduction maybesoldintheDomestic Tariff Area(DTA); 25percentoftheproduction
maybesoldintheDTA subject topayment ofapplicable duties; EOU andEPZunitsinagriculture andallied sectors maysell
upto50percentoftheproduction intheDTA subject topositive NFE; upto40percentoftheelectronic hardware production
maybesoldintheDTA subject toaNFE ofmore than25percent; EOU andEPZunits maysellintheDTA against payment
offullduties; electronic hardware unitsinEOU, EPZandEHTP mayalternatively sell50percentofproduction inDTA without
anyminimum NFE stipulation, onpayment ofapplicable duties.
f Import ofbasmati paddy andbrown riceisprohibited.
Note: NFE =Netforeign exchange earnings; f.o.r. =free-on-rail; c.i.f. =customs insurance freight; andf.o.b. =free-on-board.
Source: WTO Secretariat based onGovernment ofIndia (1997d), Export Import Policy 1997/98-2001/02.
27. Since India'slastReview, thebenefits (expressed aspercentage reduction fromthebasic rate)
provided under theconcessional schemes appear tohavebeenenhanced. Forexample, theconcessional
rateprovided under theEPCG scheme, which enables exporters toimport capital machinery ata
concessional ratesubject totheir undertaking anexport obligation, hasbeen lowered from 15to
10percent(atatimewhen, according totheauthorities, basicduties oncapital goods havefallen from
40to25percent). A0percentduty, subject toahigher export obligation, hasalsobeenintroduced.
Moreover, thecoverage hasbeenextended tomerchant exporters andservice providers. Under the
Deemed Exporters scheme thesectors covered havebeenwidened (notably toinclude theoilandgas
sectors). Thenumber ofschemes, bybroad categories, hasbeenreduced from16in1993/94 to11,
counting theend-use tariff schemes asone.20Thenumber ofsub-schemes within theend-use tariff
20Since 1993/94, bybroad categories, theSoftware Technology Parks scheme andtheElectronic Hardware
Technology Parks schemes havebeenintroduced, while thefollowing schemes havebeeneliminated: (i)Natural
Rubberscheme; (ii)InternationalPriceReimbursementscheme(onironandsteelinputs);(iii)DeepSeaFisherman
(continued...)India WT/TPR/S/33
Page 53
schemes continues tobesubstantial; asof1April 1997, 83concessional rateswereoffered fordifferent
end-users.21
28. Asshown inTable III.4, manufacturer-exporters benefit mostfromtheconcessional schemes.
However, dataarenotavailable ontheextent towhich individual industries benefit fromthedifferent
concessional schemes.
(f) Tariff bindings
29. Prior totheUruguay Round negotiations, India hadbound some 6percentofitstariff lines.
Asaresult oftheUruguay Round, India hasbound about 67percentofitstariff lines, withall
agricultural linesbound andsome 62percentoflinesforimports ofindustrial goods. Lines remaining
unbound include those onconsumer products andsome industrial items. Fornon-agricultural goods
India undertook, withafewexceptions, ceiling bindings of40percentadvalorem onfinished goods
and25percentonintermediate goods, machinery andequipment. Thephased reduction tothesebound
levels fromtheveryhighlevelprevailing in1990, is,where necessary, ininstalments overtheperiod
March 1995 totheyear2005. Intextiles, where reductions willbeachieved overtenyears, India
hasreserved therighttorevert todutylevels prevailing in1990, iftheintegration process envisaged
under theAgreement onTextile andClothing doesnotmaterialize infullorisdelayed. Finally, in
agriculture, where, except forafewgoods, India'sbound ratesrange from100to300percent,India
isintheprocess ofrenegotiating some ofitstariff bindings.
30. Although these bindings playanimportant roleinsignalling tothebusiness community an
upper limitforpossible tariffincreases, many applied tariffs arebelow theUruguay Round bound levels.
Thesimple average bound tariff (pre-Uruguay andUruguay Round) is54percent, compared with
a35percentsimple average tariff asofOctober 1997: inagriculture, theaverage bound rateis
94percentcompared witha26percentsimple average applied rate; inmining theratesare36and
25percent, respectively; andinmanufacturing thebound average of52percentcompares tothe
applied average of36percent(Tables III.5andAIII.1). Thebound rates, bystage ofprocessing,
donotshow tariff escalation.
31. India isaparticipant intheInformation Technology Agreement, covering computers,
telecommunications equipment, semiconductors, semiconductor manufacturing equipment, software,
andscientific instruments. Itsofferincluded zerorateson217items attheHSsix-digit levelbythe
year2005; thereduction tozeroduties willapply to95tariff linesbyyear2000 andreductions to
zeroon116tariff linesisleftforthefinalyear. India'sSchedule, submitted on1April 1997, is
effective.
20(...continued)
scheme; (iv)Pharmaceu ticalExportersscheme; (v)GarmentExportersscheme; (vi)ElectronicExportersscheme;
and(vii)Technology Upgradation Scheme. Inthe1997/98 budget thevalue-based advance licensing scheme
(VBAL)andthepassbookschemewerereplacedbythedutyentitlementpassbookscheme, bothbeingsub-schemes
oftheDuty Exemption Scheme.
21IntheCustoms Tariff 1997/98, theend-use concessions aresummarized innotification No.011/01.03.97.WT/TPR/S/33 Trade Policy Review
Page 54
Table III.5
Bound tariff rates andeffective rates ofduty
Bound rateofdutya
byyear2005Effective rateofdutyb
1997/98
Average unweighed tariff (percent)
Agriculture (ISIC 1) 94(33) 26(16)
Mining (ISIC 2) 36(9) 25(13)
Manufacturing (ISIC 3,includes foodprocessing) 52(41) 36(10)
Whole economy 54(42) 35(15)
Average unweighed tariff bystage ofprocessing (percent)
Unprocessed 74(40) 25(16)
Semi-processed 44(23) 35(9)
Processed 56(51) 37(17)
a Includes onlyitems bound during theUruguay Round. Thebound ratesdonotinclude thecommitments under theInformation
Technology Agreement.
b Effective m.f.n. rate,i.e.,actual ratesapplied where basic rateshavebeenreduced byexempt rates. However, many exempt
ratescannotbeincorporated suchaswhere theexempt rateapplies toonlyapartoftheHSsix-digit tariff line. Theeffective
ratealsoexcludes specific exemptions.
Note: Standard deviation isprovided inparentheses. Tariff averages consider onlythosetarifflineswithadvalorem rates. Yearbeginning
1April.
Source: WTO Secretariat.
(g) Seasonal tariffs
32. According toauthorities, India hasnoseasonal tariffs.
(h) Tariff quotas
33. According toauthorities, there arenotariff quotas operating inIndia.
(i) Plurilateral andbilateral tariff preferences
34. India receives andgrants tariff preferences under (i)theBangkok Agreement, (ii)theSouth
Asian Preferential Trading Arrangement (SAPTA), and(iii)theGlobal System ofTrade Preferences
(GSTP). Thepreferential margins varysubstantially among theproducts covered, butarethesame
forallparticipants, except fortheleastdeveloped countries which generally receive larger margins
oftariff preferences (Table III.6). Therelevant rules oforigin arebased onvalue-added criteria
(section (j)).India WT/TPR/S/33
Page 55
Table III.6
Plurilateral preferential trading agreements
Agreement Participants Coverage byIndia Selected products Preferential
margin
Bangkok
AgreementBangladesh, India,
Papua NewGuinea,
Republic ofKorea,
SriLanka (Indonesia,
Malaysia, Nepal,
Philippines and
Thailand asobservers)67items and
13additional items
forleastdeveloped
countriesFish, dessicated coconut, cloves, nutmeg, mace,
glycerine, molasses, cocoa beans, natural graphite,
fluorspar, carbon, glycerol, some edible oil,
papian pure, activated carbon, some acids, some
rubber products, some paper products,
transformers, induction furnaces, tubes, parts of
railway orrolling stock, toys. Items forleast
developed countries include dried fish,leather
products, wood andpaper products, hand-woven
sarees, andcarpets.13percentto
30percentof
m.f.n. tariffs
South Asian
Preferential
Trading
Arrangement
(SAPTA)Bangladesh, Bhutan,
India, Maldives, Nepal,
Pakistan, SriLanka437items and
571additional items
forleast-developed
countriesLeguminous vegetables, pistachios, figs,oranges,
grapes, apricots, cloves, nutmeg, mace, coconut
milkpowder, some seeds, lac,gums, some
chocolate products, some pastry products, natural
graphite, titanus oresandconcentrates, coaltar,
some petroleum products, some chemical products,
some rubber products, whole bovine skinleather,
some wood products, printed books, cotton
(notcarded orcombed), marble, travertine,
alabaster, some refractory ceramic construction
products, nuts, electro-magnetic lifting heads,
ceramic multilayer dielectric, electrodes brushes,
partofmotor vehicles, pencil leads. Items for
leastdeveloped countries include fish,unworked
redcoral andcowrie shells, musk, pineapple, fresh
jackfruit, some glycerol products, some sugar
products, mineral andaerated waters, naphthalene,
some medicaments, some fertilizers, some paints
andvarnishes, make-up forthecareofskinand
hair,preparations fororalanddental hygiene,
soapfortoilet use,tubes/pipes/hoses/artificial guts
ofplastic, some woods products, newsprint,
printed books andbrochures, some woven fabrics,
some suits/jackets andtrousers, some bed/table/
toilet/and kitchen linen, some footwear, artificial
flowers, some household articles, some boilers,
some hydraulic turbines, some pumps forliquids,
vacuum pumps, some furnace burners, some
laboratory equipment, centrifuges, some hoists,
some machinery andequipment, prepared
unrecorded media, electrical capacitors, electrical
resistors, some semiconductor devices, graphite
orcarbon articles ofakindusedforelectrical
proposes, electrical insulators, gramophone
records, copper waste andscrap, some toys10percentto
90percent
ofm.f.n. tariffs;
upto
100percentfor
least-developed
countries
Global
System
ofTrade
Preferences
(GSTP)41developing
countries (Colombo,
Myanmar and
Venezuela negotiating
membership)31items Copra, seedlac,gumarabic, gumdamar,
molasses, sand, cement, antimony ore,phosphoric
acid, gelatin, calfleather, sheets ofcork, cotton
yarn, abaca fibre, bricks, aluminium products,
shovels10percent
to30percent
ofm.f.n.
tariffs; upto
50percentfor
leastdeveloped
countries
Note: SeeTable III.8forrelevant rules oforigin.
Source: WTO (1995b), Trade Policy Review -SriLanka; andAcademy ofBusiness Studies (1997), Easy Reference Customs Tariff
1997/98.WT/TPR/S/33 Trade Policy Review
Page 56
35. Under theBangkok Agreement India offers tariff preferences on67items attheHSsix-digit
level, including fish; cloves; cocoa beans; glycerol; some rubber andpaper products; transformers;
induction furnaces; andparts ofrailway orrolling stock. Inaddition, leastdeveloped members,
including Bangladesh, receive further concessions on13items, suchassome leather, wood andpaper
products. Thepreferential ratesvarybetween 0and30percent,andaregenerally 5percentage points
below thenormal rate. Under theSAPTA, Indiaoffers preferences on437items orproduct categories
attheHSsix-digit leveltoallmember countries; theitems include leguminous vegetables; oranges;
grapes; some petroleum, chemical, rubber andwood products; alabaster; andpartsofmotor vehicles.
Thepreferential ratesvarybetween 0to90percent. There areadditional concessions on571items
attheHSsix-digit level upto100percenttotheleastdeveloped countries (Bangladesh, Bhutan,
Maldives andNepal); these items include fish; pineapple; some fertilizers; some wood products;
woven fabrics; some suits/jackets andtrousers; andsome footwear. Under theGSTP, Indiapresently
grants tariffpreferences on31items attheHSsix-digit leveltoallGSTP members atmargins between
10and50percent. These items include sand; cement; calfleather; cotton yarn; bricks; and
aluminium products. Inaddition preferences ofupto50percentonthese items aregiven toleast
developed countries.22Bilateral negotiations haverecently beenheldbetween GSTP participants. India
hasagreed tooffer tariff preferences on27items attheHSsix-digit level, subject tocompletion of
necessary domestic procedures. Theresult ofthisround istobeendorsed atthenextMinisterial meeting
ofGSTP participants.
36. Theimpact ofthese agreements onIndia'strade seems tohave been minimal. India's
merchandise imports fromtheBangkok Agreement andSAPTA member countries accounted forsome
2percentoftotalmerchandise imports in1995/96, withmost from theRepublic ofSouth Korea.
These countries accounted for7percentofIndia'smerchandise exports in1995/96.23
37. Inaddition totheplurilateral agreements, India maintains several bilateral trade agreements
andarrangements, extending arange oftariffpreferences, including duty-free entry, toimports from:
Bangladesh, Bhutan, Myanmar andNepal (Table III.7). Commonwealth preferences ofabout
5percentage points ofm.f.n. tariffs continue tobeextended toMauritius, theSeychelles, andTonga
onaround 19items, including pepper, mace andginger; sulpha drugs; some natural essential oils;
pharmaceutical chemicals; andmedicaments.
38. India receives tariff preferences under theGeneralized System ofPreferences (GSP) from
Australia,Belarus,Canada,theEuropeanUnion(EU),Hungary,Japan,NewZealand,Norway,Russian
Federation, Slovak Republic, Sweden, Switzerland andtheUnited States. Recent dataarenotavailable
ontheoverall amount ofIndia'sexports receiving GSPtreatment. Theauthorities areoftheview
thatGSPtreatment contributes toeconomic development.
22Academy ofBusiness Studies (1997), Appendix A.
23UNSD, Comtrade database.India WT/TPR/S/33
Page 57
Table III.7
Bilateral preferential trading agreements
Country Major exports covered Major imports covered Preferential rate
Bhutan Allgoods ofIndian origin. Allgoods ofBhutanese origin. 0percent
Bangladesh Nil Handwoven Jamdani saris. 0percent
Nepal Nil Allgoods manufactured inNepala0percent
Myanmar Nil Awide range ofagricultural and
manufacturing goods produced
inMyanmar (seenotifications
101/26.05.95; 77/28.09.96;
280/02.98.76 and321/02.08.76).Concessional tariffs range
between 0percentand
85percent, butmostly between
45percentand65percent
a TheAgreement provides foraccess totheIndian market freeofbasic dutyandquantative restrictions, excluding seven goods
(alcoholic liquors/beverages andtheirconcentrates except industrial spirits, cigarettes, perfumes, tobacco, andcosmetics with
non-Nepalese/non Indian brand names.
Note: These countries alsoreceive andgrant preferences under theplurilateral agreements described inTable III.6.
Source: Academy ofBusiness Studies (1997), EasyReference Customs Tariff 1997/98, Appendix AandGovernment ofIndia (1996o),
Ministry ofCommerce Annual Report 1995/95.
(j) Rules oforigin
39. India, likemost countries, doesnotapply rules oforigin toimports from m.f.n. sources.
However, within theframework ofseveral preferential tradeagreements, Indiaapplies rulesoforigin,
based onvalue-added criteria (Table III.8). Under India'sregional trade agreements -theBangkok
Agreement, theSAPTA andtheGSTP -aminimum localvalue-added requirement of50percentin
theexporting country isgenerally applied. Asomewhat lower origin requirement isapplied tothe
leastdeveloped countries under theBangkok Agreement andSAPTA, while theSAPTA andtheGSTP
require higher localvalue added ifseveral members areinvolved intheproduction process. Lessstrict
rules apply toimports from thedeclared "preferential tariff areas" ofMauritius, theSeychelles, and
Tonga.24Norulesoforigin apply tothebilateral preferential tradearrangements withBhutan, Myanmar
andNepal.
Table III.8
Rules oforigin
Agreement/Area Rules oforigina
Bangkok Agreement minimum 50percentvalue added ingeneral; 40percentforthe
leastdeveloping countries
South Asian Preferential Trading Arrangement (SAPTA) minimum 50percentofvalue added ifaproduct originates from
asingle member State; 40percentfortheleastdeveloping
countries; 60percentifseveral members areinvolved
Global System ofPreferences (GSTP) asabove
"Preferential Tariff Areas" (Mauritius, Seychelles, and
Tonga)minimum 25percentvalue added ingeneral; min50percentfor
afewproductsb
a TheBangkok Agreement andtheCommonwealth Preferences stipulate aminimum localcontent intheexporting member country
asacertain percentage oftheimported product 'sfactory costofmanufactures, while theGSTP andtheSAPTA stipulate the
same requirement asapercentage oftheproducts 'sf.o.b. value added intheexporting country.
b Sewing andknitting machines, cycles, motor cars, omnibuses, vans, lorries, motor cycles, andmotor scooters.
Note: SeeTable III.6 forparticipants oftheAgreements.
Source: WTO Secretariat based oninformation provided bytheIndian authorities.
24Customs Tariff (Determination ofOrigin ofOther Preferential Areas) Rules, 1977.WT/TPR/S/33 Trade Policy Review
Page 58
(iv) Variable import levies
40. India doesnotapply variable import levies orsimilar measures.
(v) Other levies andcharges
41. Since theReview ofIndia in1993, ithastaken steps tobroaden thetaxbaseandimprove tax
administration. TheVAT-like MODVAT, which rebates taxes oninputs andwasfirstintroduced
in1986/87,hasbeenextendedtothetextilesector,sothatthesystemnowcoversalmostallmanufactured
products. TheMODVAT continues tocontain awiderange ofexemptions, withcomplex application,
although, according totheauthorities, substantial simplification hastaken place andthescheme has
become more transparent. Many exemptions onrawmaterials aretiedtoparticular end-users, and/or
areconditional oncertain requirements, orareextended toproducers andmanufacturers located in
special regions. Thecombination ofaState sales-tax system andalackofharmonization between
Central andStatetaxes, further complicates theindirect taxsystem. TheCentral Government 'sgoal
istoputinplace afour-rate excise taxstructure bymid-1999, withamean rateof18percent, and
toeliminating exemptions.25
42. TheConstitution provides forindirect taxes tobelevied bothbytheCentre andtheStates,
withtheCentre responsible fortaxing production andtheStates responsible fortaxing sales(including
inter-state sales). Thelegalframework islaidoutintheCentral Excises andSaltAct,1944andother
special Actsenacted fromtimetotime. Excise dutyandother indirect taxes levied bytheGovernment
areapplied uniformly onbothdomestically produced andimported goods; imports, asnoted above,
being subject to"additional" duties equal totheexcise taxes onsimilar domestically produced goods.
(a) Central Government levies andcharges
43. Excise duties ,which arethemain form ofindirect tax,arevirtually alllevied atadvalorem
rates. Themaximum rateofexcise dutydecreased from 105percentin1990/91 to60percent
in1993/94 andto40percentin1997/98. Thepresent structure includes 12rates, ranging from3to
40percent. Anumber ofheadings, accounting forabout 17percentofthe139broad budget headings,
areexempt fromexcise duty.26Theshare ofexcise duties intotalrevenue oftheCentral Government
(excluding trade taxes) hasincreased from about 22percentin1993/94 to34percentin1997/98
(Table III.9).
25Government ofIndia (1997b).
26Thesecommoditiesinclude:meat andedibleoffal;aquaticinvertebrates;ediblevegetables,rootsandtubers;
edible fruitandnuts, andpeelofcitrus fruitormelon; coffee; tea;spices; vegetable sapsandextracts; vegetable
plaiting materials; processed fixed vegetable oils;preparations ofaquatic invertebrates andplants; wastes from
thefoodindustries;leather;manufacturesoffurskinsandartificialfur;manufacturesofplaitingmaterialbasketware
andwickerwork;silk;knittedorcrochetedfabrics;articlesofapparelandclothingaccessories;umbrellas,walking
sticks, seatsticks etc;artificial flowers, articles ofhuman hair; andmusical instruments.India WT/TPR/S/33
Page 59
Table III.9
Indirect taxstructure oftheCentral Government excluding taxes oninternational trade, 1993/94 and1997/98
(PercentofCentral government revenue)
1993/94 1997/98a
Total excise taxes, Central Government
Basic exciseb
Additional duties ontextile andtextile articles
Additional duties onother goodsb
Cesses oncommodities21.8
18.1
0.4
0.0
3.234.2
29.5
0.4
2.2
2.0
Service taxc0.0 0.8
Other taxes
Foreign travel tax
Inland airtravel tax0.0
0.0
0.00.6
0.2
0.4
a Budgeted numbers.
b Article 272oftheConstitution provides forsharing apartofthenetproceeds oftheUnion Excise Duties. Thedataabove has
beenadjusted accordingly andshows theCentral Government 'snetrevenue.
c Includes salestaxontelephone, insurance, brokerage, andsince November 1996advertising, courier, andradio paging services.
Source: Government ofIndia (1997b), Budget 1997/98.
44. TheAdditionalDutiesofExcise(GoodsofSpecialImportance)Act,1957providesforadditional
duties, which areinlieuofsalestax.Additional excise duties areimposed onsugar, tobacco, silk,
woollen fabrics andman-made fabrics (equivalent to13broad budget headings). Theratesonsugar
range from Rs21to37perquintal, andontobacco from 10to75percentandspecific ratesfrom
Rs1.4toRs352per1,000 cigarettes. Textiles, especially synthetic andcotton yarns, havebeensubject
toseparate legislation since 1978; thepresent rateis15percentoftheexcise levied under theCentral
Excise Act,1994.
45. Other duties levied bytheCentral Government include:
- cesses administered bytheDepartment ofRevenue andcollected onafewselected items27;
- service taxat5percentlevied onawiderange ofservices28;
- foreign travel tax,introduced through theFinance Act,1971, provides forataxatthe
rateofRs500(since January 1998, previously Rs750)foreachpassenger undertaking
aninternational journey, andRs150forjourneys toneighbouring countries. Onethird
oftherevenue made, lessrefunds, ispaidtothecarriers ascollection charges29;and
- inland airtravel tax(introduced through theFinance Act,1971) provides forataxof
15percentofthetotalfareandispayable bypassengers ondomestic airtrips, except
27Cess islevied onhandloom fabric, sugar, tea,biris, paper, jutemanufactures, automobiles, indigenous
crude oil,cotton, vegetable oil,andtelevision sets.
28Telephone, insurance, brokerage, advertising, courier, andradio paging services, consulting engineers,
customs house agents, airtravel agents, clearing andforwarding agents, outdoor caters, pandal contractors and
mandap keepers, man-power recruitment agencies/consultants, andtouroperators including carrentals.
29Government ofIndia (1997b).WT/TPR/S/33 Trade Policy Review
Page 60
tocertain exempted areas andfortickets paidforinU.S.dollars. Fivepercentofthe
revenue reverts tothecarriers asacollection charge.30
(b) State Government levies andcharges
46. TheStates areresponsible forsalestax.TheStates levytwodifferent types ofsalestax:the
general sales tax(GST) andthecentral sales tax(CST). TheGST isgenerally applied atthe
manufacturer levelonawiderange ofgoods andatratesbetween 4and25percent; luxury goods
attract thehigher rateswhile mass consumer items aretaxed atlower ratesorareexempt. TheCST
isa4percentinter-state tradetaxwiththerevenue collected bytheStateproviding thegood. Exports
ofgoods andservices areexempt from salestax.
47. Some States alsolevyaturnover taxofaround 1percentonallbusiness withaturnover
exceeding acertain limit. Recently, some States haveincreased theirreliance ontheturnover taxas
asubstitute forthesalestax.
48. Other duties levied bytheStates include:
- octroi ,anadvalorem levyranging from1to3percent,imposed bythelocalauthorities
uponentry ofgoods intothemunicipality. Some States haveabolished theoctroi, while
others (Karnataka andMadhya Pradesh) havereplaced theoctroi withanentrytaximposed
onlyongoods brought intothemunicipality forsale;
- stamp duties andregistration fees,insome States ashighas12.5percent,imposed on
thetransfer ofproperty;
- interest taxlevied onbanking andfinancial service companies; and
- stateexcise dutyimposed bysome States onthemanufacture ofliquor.
(vi) Minimum import prices
49. TheCustoms Act,1962, Section 14permits theGovernment tosetminimum import prices
forcustoms valuation purposes, taking intoaccount price trends ofsimilar goods. Suchprices must
benotified intheOfficial Gazette. According totheauthorities, minimum import prices havenotbeen
usedsince 1979.
(vii) Import prohibitions, licensing andstatetrading
(a) Legal andadministrative basis
50. TheCentral Government haslegislative authority toprohibit importation (andexportation)
ofanygoods forawiderange ofspecified purposes. Section 11oftheCustoms Act,1962states that
theCentral Government mayprohibit trade inanygoods byofficial notification for,interalia,the
following purposes: security; maintaining standards ofpublic morality anddecency; conserving foreign
exchange; avoiding product shortages; establishing anydomestic industry; preventing serious injury
todomestic production; aswellasanypurpose conducive totheinterest ofthegeneral public. Powers
30Government ofIndia (1997b).India WT/TPR/S/33
Page 61
toprohibit, regulate orrestrict tradebyofficial notification arealsocontained insection 3oftheForeign
Trade (Development andRegulation) Act,1992. While theForeign Trade (Regulation) Rules, 1993
specify therules relating toimport transactions covered bylicences, theForeign Trade (Exemption
from Application ofRules incertain cases) Order, 1993 specifies thenature ofimport transactions
notcovered bylicences. TheDirector General ofForeign Trade (DGFT) anditsregional offices in
India, areempowered toissue theimport licence. Allapplications/requests forissue oflicences are
placed before aspecial licensing committee andlicences aregranted onthebasis ofapproval bythe
saidcommittee onmerits ofindividual cases.
51. TheGovernment 'strade policy isformulated intheExport andImport Policy. Thepolicy
isnormally announced forafive-year period, withaviewtoproviding traders andinvestors witha
stablemedium-termpolicyframework.However,substantialannualchangestakeplace.InMarch1997,
theExport andImport Policy fortheperiod 1997/98 to2001/02 wasannounced.
52. Import policy iseffectively administered byaNegative ListofImports (Chapter 15oftheExport
andImport Policy). Allgoods notcovered bytheNegative Listarefreely imported. Products on
theNegative ListofImports aredivided intothree categories:31
- prohibited items,which maynotbeimported under anycircumstances;
- restricted items,which require aspecific import licence oraPublic Notice forimport; and
- canalized items,which canbeimported bypublic sector undertakings.
(b) Import prohibitions andother controls
53. Prohibited items, contained inPartIoftheNegative ListofImports relate toreligious and
cultural sensitivities, ortothefulfilment ofinternational obligations suchasCITES. Asof1April 1997,
thelistofprohibited items contained, bybroad categories, seven items (equivalent to59items atthe
HSeight-digit level)32,withthesub-item onwildanimals theonlyoneadded tothelistsince India's
previous Review (Table III.10).
54. India maintains anembargo ontrade withIraq,based onU.N. Security Council resolutions,
andwithFiji,withwhich India hasnodiplomatic relations.
55. Thecurrent licensing system restricts, orinsome cases, prohibits imports.
31Capitalgoods,rawmaterials,intermediates,components,consumables,spares,parts,accessories,instruments
andother goods, which areimportable without restriction, maybeimported byanyperson whether heisanactual
userornot. However, imports requiring alicence, mayonlybeimported bytheactual userunless theactual
usercondition isspecifically waived byalicensing authority (Government ofIndia, 1997d, Chapter V).
32WTO document WT/BOP/24, 22May 1997.WT/TPR/S/33 Trade Policy Review
Page 62
Table III.10
Import prohibitions, 1993 and1997
Prohibited items, 1April 1997 Status on31March 1993
Tallow, fatand/or oils,rendered, unrendered orotherwise, ofanyanimal origin including the
following:Prohibited
(i) Lard stearin, oleostearin, tallow stearin, lardoil,oleooilandtallow oilnotemulsified ormixed
orprepared inanywayProhibited
(ii) Neat's-foot oilandfatsfrom bone orwaste Prohibited
(iii) Poultry fats,rendered orsolvent extracted Prohibited
(iv) Fatsandoilsoffish/marine origin, whether ornotrefined, excluding codliveroil,squid liveroil
oramixture thereof andfishlipidoilcontaining eicospentaenoic acidandother decosahexaenoic
acidProhibited
(v) Margarine, imitation lardandother prepared edible fatsofanimal origin Prohibited
(vi) Animal rennet Prohibited
(vii) Wild animals including theirparts andproducts andivory Only unmanufactured
ivory prohibited
Source: GATT (1993), Trade Policy Review -India, andGovernment ofIndia (1997d), Export Import Policy 1997/98-2001/02, Negative
ListofImports, PartI.
(c) Restricted items andimport licensing
56. Restricted items, contained inPartIIoftheNegative ListofImports, oftheExport andImport
Policy 1997/98-2001/02, mayonlybeimported against alicence orinaccordance withaPublic Notice
issued forthispurpose, except inthecaseofships, trawlers andboats, aircraft andhelicopters,
automobiles andnewsprint forwhich nolicence isrequired butimports aresubject topublished
conditions33,andforsecond-hand capital goods, withaminimum residual lifeoffiveyears, which
canbeimported without alicence bytheactual user.34Therestrictions are,according totheauthorities,
forbalance-of-payments reasons aswellasongrounds ofsafety, security andenvironment.
57. Almost allconsumer goods arerestricted, andtheirimportation ispermitted onlywithalicence.
Other restricted goods requiring alicence include:
- specified precious, semi-precious andother stones;
- safety, security andrelated items;
- seeds, plants andanimals;
- insecticides andpesticides;
- drugs andpharmaceuticals;
- items relating tothesmall-scale sector;
- miscellaneous items; and
- special items required byhotels andrestaurants, thetourism industry andrecreational
bodies.
58. Amore detailed listoftheitems isprovided inTable AIII.3. Theimportation oftherestricted
goods isallowed selectively withalicence orinaccordance withgeneral schemes laiddown inpublic
notices.
33WTO document G/LIC/N/3/IND/1, 23January 1996.
34Government ofIndia (1997d), Chapter V.India WT/TPR/S/33
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59. Although thenumber oftariff lines subject tolicensing hasdecreased inrecent years, the
coverage isstillextensive; asof1April 1997, approximately 32percentoftotallines35weresubject
tolicensing, compared with37percenton1April 1996. Thelicensing requirement isconcentrated
onindustrial products (Chart III.4).
60. AsofMay1995, thepercentage ofmanufacturing value added protected bylicensing was
estimated tobeabout onethird, compared tosome 84percentintheagricultural andlivestock sector.36
61. Since India'slastReview in1993, items removed from thelicensing requirements include,
interalia,some consumer goods; certain electronic items; mostdrugs andpharmaceuticals; newsprint;
diesel generating setsupto1,500 KVA; electronic portables upto3.5KVA; andcertain restricted
items related tothesmall-scale sector. Items thathavebeenmade subject tolicensing requirement
since 1993 include some chlorofluorohydrocarbons (CFCs); some drugs andpharmaceutical items;
batteries andsodium metal (Table III.11).
35WTO calculations based onWTO document WT/BOP/N/24, 22May 1997.
36Pursell (1996).WT/TPR/S/33 Trade Policy Review
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Table III.11
Changes initems subject toimport licensing since 31March 1993
Items removed from licensing requirement Items made subject tolicensing requirement
Consumer goods:
-chewingum
-pineapples
-nuts(prepared orpreserved)
-pineapple juice
-tomato juice
-grapejuice
-instant coffee including decaffeinated
-soyasauce
-tomato ketchup andother tomato sauce
-foodflavouring material
-alltypes ofcameras andtheirparts
Electronic items:
-Vsetterminals
-walkie-talkie sets
-radio paging systems
-cellular phone
-video tapes anddiscofeducational nature
-audio cassette ofeducational nature
Drugs andpharmaceutical:
-alltypes ofdrugs andpharmaceuticals items except seven
items asmentioned intheNegative ListofImports of
Chapter XVofEXIM Policy
Items relating tosmall scale sector:
-flavouring essences likegasmin concrete inbulkfrom
cassia oilinbulkform
-agaroil
-spices oil
-hairdyes(natural herbal orsynthetic etc.)
Miscellaneous items:
-items likepolyester staple fibre/tow
-diesel generating setsupto1.500 KVA
-electric portable upto3.5KVA
-different varieties ofpaintings
-drawings andpastels
-tailors dummies
-vacuum flask
-other vacuum vessels
-cigarette lighters
-inkpads
Special categories:
-newsprint withAUcondition fornewspaper industrySafety, security andrelated items:
-some Chloro Fluro Hydro Carbons
Drugs andpharmaceuticals:
-polybrominated biphenyls
-polycholinated biphenyls
-tris(2,3di-bromopropyl) phosphate
-crocidolit
-hazardous wastes
-hazardous chemicals
Miscellaneous items:
-batteries andtyres ofpassenger automobile vehicles
including twowheelers, three wheelers andpersonal type
vehicles
-Sodium metal
Source: GATT (1993), Trade Policy Review -India andGovernment ofIndia (1997d), Export Import Policy 1997/98-2001/02.
Special Import Licence
62. Theimportationofsomerestricteditems(includingcertainconsumergoods)hasbeenliberalized
bypermitting theirimportation through freely transferable Special Import Licences (SILs). Aside from
being usedasasteptowards liberalization, SILsarealsodesigned toprovide anincentive toexporters.
SILs aregranted tolarge established exporters; exporters ofelectronic goods, electronic andIndia WT/TPR/S/33
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telecommunications equipment, diamonds, gems, andjewellery; deemed exporters37;andmanufacturers
whohaveacquired prescribed quality certification, inproportion totheirexport orforeign exchange
earnings (Table III.12).
Table III.12
Access toSpecial Import License (SIL)
Category Amount ofSIL
1. Large established exportera-6percentto12percentofexports (free-on-board) or
7.5percentto15percentofnetforeign exchange
earnings.
-Additional SILisgranted along thefollowing principals:
(i)2percentifexporter isregistered asasmall-scale
industry, provided exports are50percenthigher than
previous year; (ii)1percentforexporter offruit,
vegetables, floriculture, andhorticulture, provided
exports are10percenthigher thanprevious year;
(iii)1percentifproducts aremanufactured and
exported from North Eastern States, provided exports
are10percenthigher thanprevious year; and
(iv)1percentifexports toaspecified listofcountriesb.
2. Deemed exporterc6percentofexports (freeonrail/road)
3. Exporter ofelectronic, telecommunications equipment 15percentto25percentofnetforeign exchange earnings
4. Manufactures ofquality productsd5percentofexports (free-on-board)
5. Other exporters withexports (free-on-board) ofmore than
Rs50million inthepreceding yearorannual average of
Rs20million during thethree preceding years.e4percentofexports (free-on-board)
a Exporters areclassified inoneofthecategories Export Houses, Trading Houses, StarTrading Houses orSuper-Star Trading Houses
dependingonthesizeoftheexports(Rs0.2billiontoRs15billion),ornetforeignexchangeearner(Rs0.16billiontoRs12billion).
b 43countries listed inAppendix 33,Handbook ofProcedures, Vol.1.
c Refers totransactions inwhich thegoods, supplied toaprescribed listofproducers (Chapter 10oftheHandbook ofProcedures,
Vol.1),donotleave thecountry.
d Exporter holding ISO9000(series) orIS/ISO 9000(series) ofquality certification.
e Exports ofdiamonds, gems andjewellery arecounted at50percentoftheexport value.
Source: Government ofIndia(1997d), Import Export Policy 1997/98-2001/02, Handbook ofProcedures, Vol.1,Chapter 10(category 2),
11(category 3and5),12(category 1),and14(category 4).
63. Thecoverage ofSILshasgradually expanded since theirintroduction in1992/93; tariff lines
havetypically being moved from therestricted listtotheSILlist,andthereafter tothefreelist.As
of1April 1997, roughly 10percentoftotallinesattheHSeight-digit levelcould beimported through
anSIL,anincrease ofonethirdascompared toayearearlier.38TheSILsareconcentrated inindustrial
products (Chart III.5).39
37Deemed exporters refers totransactions inwhich thegoods, supplied toaprescribed listofproducers, do
notleave thecountry.
38WTO calculations based onWTO document WT/BOP/N/24, 22May 1997.
39SeeWTOdocumentWTO/BOP/N/24,22May1997foracompletelistoftherestrictedproducts,byHS-eight
digit, thatmaybeimported withaSIL.WT/TPR/S/33 Trade Policy Review
Page 66
(d) State-trading (canalization)
64. Canalization agencies arestate-trading agencies withspecial import privileges (orexports
privileges, section 3(v)). However, imports ofcanalized items byprivate agents mayalsobepermitted
against alicence granted bytheDirector General ofForeign Trade. Suchimports, which aregenerally
ofasmaller quantity andmaynotbehandled bythecanalizing agency, areallowed toprivate
individuals/firms against aNoObjection Certificate (NOC) issued bythecanalizing agency concerned.
Dataarenotavailable ontheamounts imported byprivate agents. According totheauthorities, the
mainobjectives ofcanalization policy aretoobtain better terms oftradethrough bulktransactions and
torealize economies ofscale intrade operations.
65. Thelistofcanalized items, bybroad categories, hasincreased fromseven toeightsince 1993,
asaresult ofthecanalization ofcloves, cinnamon andcassia inthe1997/98 Budget (Table III.13).
Some sub-items havebeende-canalized, suchaskerosene, liquified petroleum gas,naphtha, andsome
fertilizers; others havebeencanalized, suchashigh-speed diesel. However, currently some ofthe
canalized items, including cloves, cinnamon andcassia (equivalent to47items outof176items in
total) arealsounder theSILregime. Imports ofcanalized imports fellfrom27percentofmerchandise
imports in1988/89 to19percentin1996/97. Canalized imports havebeendominated bypetroleum
products, accounting forabout 78percentoftotalcanalized imports in1996/97, followed byedible
oils(12percent).India WT/TPR/S/33
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Table III.13
Canalizing agencies andproducts (imports)
Products Agency
1April 1997 31March 1993 1April 1997
(1)Petroleum products, namely:
(a)Aviation turbine fuel
(b)Crude oil
(c)Motor spirit
(d)Bitumen (asphalt) -paving grade
(e)Furnace oil(except lowsulphur
heavy stock, lowsulphur waxy
residue)
(f)High speed diesel(1)Petroleum products, namely:
(a)Aviation turbine fuel
(b)Crude oil
(c)Kerosene
(d)Liquified petroleum gas(LPG)
(e)Motor spirit
(f)Bitumen (asphalt) -paving grade
(g)Naphtha
(h)Furnace oilIndian OilCorporation Limited
(2)Alltypes ofnitrogenous, phosphatic,
potassic fertilizers except DAP, MOP,
MAP, SOP, NPandNPK fertilizers(2)Alltypes ofnitrogenous, phosphatic,
potassic andcomplex chemical
fertilizers except DAP fertilizerMinerals andMetals Trading
Corporation ofIndia Limited
(3)Coconut oil,RBD palm oil,andRBD
palm stearin(3)Oils(coconut oil,groundnut oil,
safflower oil,palm oil(alltypes,
including palmolein and
other fractions), rapeseed oil,
sunflower oil,soyabeanoil,
cotton seedoil)State Trading Corporation ofIndia
Limited andHindustan Vegetable
OilsCorporation Limited
(4)Seeds (copra, groundnut, palm,
rapeseed, safflower, soyabean,
sunflower, cotton)Same asin1997 Asabove
(5)Allother non-edible oilsbutexcluding
tungoil,China wood oilandnatural
essential oils,seeds oranyother
material from which oilcanbe
extracted notspecifically menioned
above orelsewhere inthepolicy(5)Allother oilsorseeds oranyother
material from which oilcanbe
extracted (whether edible ornon-edible)
including vegetable fatsnotspecifically
mentioned above orelsewhere inthis
policy (butexcluding tungoil/China
wood oilandnatural essential oilsAsabove
(6)Palm stearin, excluding crude
palm stearin; palm kernal oil;
andtallow amines ofalltypesSame asin1997 State Trading Corporation ofIndia
Limited
(7)Cereals, excluding feedgrade
maize poultry oranimal feedSame asin1997 Food Corporation ofIndia
(8)Cloves, cinnamon andcassia Notcanalized Spices Trading Corporation Limited
andNational Agricultural Cooperative
Marketing Federation ofIndia Limited
Source: GATT (1993), Trade Policy Review -India, andGovernment ofIndia (1997d), Export Import Policy 1997/98-2001/02, Negative
ListofImports, PartII.
66. TheGovernmentisguidedbyanumberoffactorsindecidingontheappropriatelevelofcanalized
imports, including thebalance ofpayments anddomestic production andprices situation. Inthecase
offertilizers, crude oil,andpetroleum products, availability offoreign exchange isthemajor
consideration indeciding thequantity ofimports. Import ofcereals andedible oilsisundertaken from
timetotimeontheadvice oftheGovernment.40Theauthorities havealsonoted that,although canalizing
agencies retain special andexclusive privileges regarding imports andexports, allpublic sector
40WTO document G/STR/N/IND, 31January 1996.WT/TPR/S/33 Trade Policy Review
Page 68
undertakings, including canalizing agencies, arerequired tofollow commercial principles incarrying
outtheiroperations.
(viii) Import quotas
67. India doesnotapply quantitative restrictions intheformoffixed quotas aspartofitslicensing
system. However, thelicensing system implicitly places ceilings ontheproducts covered.
(ix) Import cartels
68. Import cartels thatindulge inrestrictive trade practices areprohibited under Indian law
(Monopolies &Restrictive Trade Practices Act,1969).
(x) Countertrade
69. Indian importers arenotrequired toenter intoagreements oncountertrade. However, global
tenders often include aclause providing preferences tocompanies willing toagree, ceteris paribus ,
tocountertrade operations. Themajor state-owned companies thathaveengaged incountertrade are
theIndian Minerals andMetals Trading Corporation (forimports ofmany fertilizers andexports of
minerals) andtheStateTrading Corporation (forimports ofcertain agricultural goods). TheMMTC
andSTCentered intocountertrade contracts ofabout Rs190billion or2percentofGDP in1995/96;
according totheauthorities, MMTC andSTC didnotenter intoanycountertrade arrangements
in1996/97.
(xi) Standards andother technical regulations
70. Themainobjectives ofIndia'sstandards andcertification procedures aretoensure thatproducts
aresafe,ofhighquality andconform totherelevant Indian standards. According totheauthorities,
theintent ofpolicy tointegrate India intotheinternational economy, hasresulted inagreater emphasis
onbringing Indian standards uptointernational levels. There remains, nevertheless, strong sentiment
thatmeasures byindustrialized countries toprovide "special anddifferential treatment", todeveloping
countries arenotbeing adequately addressed. Most standards inIndia arevoluntary although health
andsafety regulations aremandatory forseveral products. Progress hasbeenmade sincethelastReview
ofIndiainharmonizing Indian standards withthose setbyinternational bodies, suchastheInternational
Organization forStandardization (ISO), butthereremain anumber ofnon-transparencies inthesystem
regarding therelationships between thevarious standard setting andenforcing bodies. Some policies
mayactagainst imports, suchasdistinctions made between imported anddomestically produced bulk
grains andcompulsory product certification forsome goods thatmaynotbeextended toimported goods.
Enforcement ofcompulsory standards mayalsobeaproblem although stepsarebeing taken toimprove
this.
(a) Standards, testing andcertification
71. TheBureau ofIndian Standards (BIS), established asastatutory body under theBureau of
Standards Act,1986, replaced theIndian Standards Institution (ISI)setupin1947 andisresponsible
forformulating andsetting national standards. Itsroleincludes thedevelopment ofactivities relating
tostandardization, certification ofproduct andquality systems, testing andcalibration, enforcement,
international cooperation andthecreation ofawareness among consumers. Over thepastdecade an
emphasis hasbeenplaced onharmonizing national standards withinternational andregional standards;
thusinternational standards areoften adopted asIndian standards under thenumbering system ofIndia WT/TPR/S/33
Page 69
ISO/IEC, orareharmonized withinternational standards inareas ofIndia'strade interests. Nearly
3,500IndianstandardshavebeenharmonizedwithISO/IECorECstandardssofar.TheBISparticipates
intechnical andpolicy-making committees oftheISO41,theInternational Electrotechnical Commission
(IEC) andalsohasbilateral cooperation memoranda ofunderstanding withthenational standards bodies
ofChina, Cuba, Germany, Israel, Mauritius, Russia andTurkey.
72. TheBISisheadquartered inDelhi andhasfiveregional and19branch offices. Anational
screening committee wasalsoestablished in1995 todetermine priorities forsubjects tobetaken up
forstandards formulation, inkeeping withchanging industrial requirements. Toimprove, harmonize
andpromote standardization activities throughout India, state-level committees onstandardization and
quality systems were established in23States andUnion Territories.
73. Almost 17,000 standards forsome 1,400 items havebeenissued bytheBISsince itsformation
in1986, covering allsectors. BISalsoissues certificates under avoluntary scheme forproducts, quality
systems andenvironmentally friendly products. Atpresent, around 12,700 certificates havebeenissued,
covering 956products. Although thescheme isvoluntary, toensure health andsafety standards, the
Government hasmade certification compulsory for136ofthese 956products. Since theBISdoes
notissuecertification forimported goods, itisnotclearwhether thisconstitutes abarrier toimported
goods falling within thegroup of136products forwhich certification ismandatory.
74. Inviewoftheimportance ofinternational trade inthepresent national policy, BISactivities
toharmonizeIndianstandardswiththoseofinternationalorganisationshavebeensteppedup.TheQuality
System Certification Scheme (QSCS), which hasbeenoperational since 1991andisaccredited bythe
(Dutch) Raad voor Accreditatie (RVA), hasseen thegranting of308newlicences under the
IS/ISO 9000 series.42Therules, procedures anddocumentation practices oftheQSCS areinlinewith
theISO/IEC Guide andwiththeEuropean Standard EN45012. India atpresent hasnoagreement
toaccept standard marks ofother countries, although, according totheauthorities, discussions are
ongoing withBhutan, Israel, SriLanka andSouth Africa.
75. Under theWTO Agreement onTechnical Barriers toTrade, theMinistry ofCommerce has
nominated theBISastheNational Central Enquiry Point forinformation onIndian standards, technical
regulations andcertification inIndia andfornotifications totheWTO onnational standards and
regulations.43
76. Inorder toimplement itscertification schemes, theBISprovides testing support through its
central laboratory andseven regional laboratories. Some 28,000 samples aretested bytheselaboratories
eachyear. Inaddition, theservices ofalmost 100national laboratories recognized bytheBISunder
theBISLaboratory Recognition Scheme, areutilized fortesting. TheBISalsoinspects export products
onbehalfofforeignlaboratoriesincludingtheCanadianStandardsAssociation,UnderwritersLaboratory,
USA andtheSouth African Bureau ofStandards. There arepresently 237units operating for
Underwriters Laboratory USA, 67fortheCanadian Standards Association andseven fortheSouth
African Bureau ofStandards.
41BISisafounding member oftheISO,therefore taking anactive roleinpromoting andharmonizing Indian
withinternational standards.
42Inorder toclarify therelationship between Indian andinternational certification marks, theISO9000 series
hasbeen adopted astheIS/ISO 9000 series.
43WTO document G/TBT/Enq/1, 6June 1995.WT/TPR/S/33 Trade Policy Review
Page 70
77. Inaneffort toimprove compliance withstandards theBureau established a"Standing Committee
onEnforcement" in1994. Theresponsibilities oftheCommittee include thedevelopment ofastrategy
todealwithviolations ofquality control orders andalsooftheBISAct,1986. TheCommittee suggested
thefollowing: areview ofexisting statutory provisions inorder toincrease theireffectiveness; education
ofconcerned bodies intheGovernment andconsumer organizations ontheprovisions oftheBISAct
andother quality control orders; andencouragement ofconsumer organizations toactively participate
intheenforcement ofstandards. TheBIShaspublished anenforcement manual whose methods are
tobeuniformly applied across thecountry. AnEnforcement Nodal Officer hasbeennominated at
eachBISbranch tocoordinate these functions. Inaddition, BISrules were amended toextend the
powers ofsearch andseizure available toinspecting officers under theAct.44Training exercises were
heldtoincrease awareness oftheenforcement provisions oftheActfortherelevant enforcement officers.
Interaction between theBISandStateGovernments wasalsoincreased through statelevelcommittees
forstandardization andquality control andworkshops forstategovernment officials.45
78. Although theBISisthemain standards setting andenforcement body inIndia, standards and
certificates inspecified sectors arealsomaintained andenforced byotherbodies. Forexample, sanitary
andphytosanitary measures areregulated bytheDirectorate ofMarketing andInspection intheMinistry
ofAgriculture, andtheMinistries ofHealth andofFood Processing dealwithstandards andquality
ofprocessed foods. Asstandard setting bydifferent ministries canleadtooverlap andconfusion,
SectoralCoordinationCommittees(SSCs)havebeenestablishedforsixsectors,namelyfoodprocessing,
power,steel,automotives,textiles,andinformationtechnologyinordertodevelopharmonizedstandards
atthenational level.
79. FoodsafetyandqualityfallsunderthePreventionofFoodAdulterationAct,1954aslastamended
in1986. TheAct,which isadministered bytheMinistry ofHealth butwithState Governments
responsible forlicensing andquality control, aimstoensure highquality infoodforconsumers, to
protect consumers fromdeception andtoencourage fairtrade practices. There arefourCentral and
81Statefoodlaboratories, which carry outtesting across thecountry, andfoodinspectors areappointed
bythestateandcentral government authorities forcontrolling quality. Penalties foroffences relating
totheActcanresult inuptotwoyears imprisonment along withafine.46
80. Quality control ofdrugs isunder thepurview oftheDrugs andCosmetics Act,1940, asamended
in1988. TheActandaccompanying Rules areadministered bytheMinistry ofHealth andimplemented
bytheStateGovernments; theCentral Government formulates rules, updates theIndian pharmacopia
andregulates theintroduction ofnewdrugs. Under theDrugs andCosmetics ActandRules, quality
control isexercised through alicensing system forpharmaceutical products imported orproduced and
soldinIndia. TheActprovides forinspection ofpremises onaregular basis andcontains penal
provisions foroffences relating tothesaleofadulterated, misbranded andspurious drugs. Standards,
under theAct,arealsomaintained foralternative Indian medicines suchasayurveda, unani andsiddha
systems.
44Atotalnumber of21and11raids were carried outbytheBISandState Governments, respectively, during
fiscal year1994/95 under these search andseizure provisions (Bureau ofIndian Standards, 1995).
45Bureau ofIndian Standards (1995).
46These penalties mayvaryfrom State toState because ofamendments made toSection 16oftheAct,which
deals withpenalties.India WT/TPR/S/33
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81. Allimported drugs havetogothrough aprocess ofquality testing before theyareallowed into
India. TheDrugs andCosmetics Rules stipulate thatpermission forthemarketing ofanewdrugcan
onlybegranted onceitssafety, andefficacy fortheconditions forwhich itistobeused, areensured.47
TheCentral Drugs Standard Control Organisation, headed bytheDrugs Controller ofIndia, isentrusted
withcontrolling thequality ofdrugs imported intoIndia, regulating standards indrugs andcoordinating
theactivities ofstateandunion territories drugs control authorities. Approval isgenerally given
automatically forknown importers andforknown products.
(b) Labelling andpackaging
82. Ingeneral, allproducts soldinIndiaarerequired tocarry alabelindicating country orcountries
oforigin. Theauthorities areintheprocess ofensuring thatallproducts manufactured inIndia are
marked witha"Made inIndia" label. Similarly, allimports intoIndiamustbemarked withanindication
oftheirorigin. Inaddition, theIndian Government instituted an"Eco Mark" in1991 toindicate
"environmentally friendly" products, although, according totheauthorities, ithasyettobesuccessful.
TheEcoMark isadministered bytheBISforanumber ofproducts including packing material, cosmetics
andtoiletries, andelectrical andelectronic items.48TheGovernment hasalsodesignated theBISas
thecertifying bodyinIndiaforenvironmental management systems (EMS) standards, orIS/ISO 14000.
Thescheme isexpected tobelaunched shortly.
83. ThePrevention ofFood Adulteration Act, 1955 provides thelegislative framework for
food-packagingregulationinIndia.TheIndianInstituteofPackaging,establishedin1966,istheprimary
agency forthepromotion ofbetter packaging standards andthedissemination ofinformation on
packaging. TheInstitute provides anumber ofservices including testing, quality control, training,
packaging development, feasibility studies andpromotional programmes forimproving packaging
standards. Itisrecognized bytheDirectorate General ofShipping astheagency fortesting hazardous
cargo forU.N. certification. TheInstitute 'slaboratories arerecognized bytheBISandapproved as
anR&D facility bytheDepartment ofScientific andIndustrial Research (DSIR) intheMinistry of
Science andTechnology. TheInstitute hasalsobeenentrusted withtheestablishment ofasystem of
barcoding. EANIndia, amember ofEANInternational inBrussels, hasrecently commenced operations
topromote theuseofbarcoding inthecountry.
(xii) Government procurement
84. India'spolicies ongovernment procurement arebased ongeneral principles laiddown inthe
General Financial Rules oftheMinistry ofFinance. Itisdifficult todetermine totalprocurement as
itisundertakenbothbythecentralpurchasingagency,theDirectorateGeneralofSuppliesandDisposals,
andbyanumber ofMinistries suchasRailways, Public Works andDefence. Thevalue ofpurchasing
bytheDirectorate General ofSupply hasdeclined somewhat fromaround Rs38.4billion in1993/84
toRs32.15 billion in1996/97.
85. Although there isnoseparate Indian legislation forgovernment procurement, rules forall
government purchases aresubject toguidelines established bytheDepartment ofSupply andmustbe
consistent withtheGovernment 'sGeneral Financial Rules. Theprocess ofprocurement iscarried out
byinviting tenders. Anumber ofdifferent possibilities existinthisrespect; anopenbidisglobally
47Thisusually requires clinical trials inIndia before thenewdrugispermitted tobeimported andmarketed
inthecountry (Gothoskar, 1983, pp.223-228).
48DunandBradstreet (1996).WT/TPR/S/33 Trade Policy Review
Page 72
advertised andforeign andIndian firms responding tothese tenders aregiven equal consideration.
Insome cases, limited tenders areissued toselected suppliers thatarealready known andregistered
withtheissuing organization orMinistry.49Inorder forthislistofsuppliers tobeselected, limited
tenders areoften preceded byaninvitation forcompanies toregister withtheissuing organization,
allowing quality andreliability tobejudged. Ingranting procurement contracts, aprice preference
of15percentisgiven to"indigenous equipment" suppliers, forexample, intelecommunications.50
Intheshipping sector, price preferences ofupto30percentapply toIndian bidders onprocurement
contracts.
86. Depending onthenature andtypeofgoods orequipment tobepurchased, atwo-bid system
maybeused, withtechnical andcommercial bidssubmitted separately andinstages. Evaluations are
firstmade onthebasisofbidslimited tothetechnical specifications, fromwhich ashortlist ofeligible
suppliersisprepared.Thecompaniesontheshortlistarethenaskedtosubmitcommercialspecifications,
forfinalconsideration. Thecontract isusually granted within threemonths ofsubmission. Asingle-bid
system forproducts where "clear anddetailed specifications" areavailable alsoexists. Inthiscase,
thebidders arerequired tosubmit theirtechnical andcommercial offers simultaneously forevaluation.
Toincrease transparency initsbidding procedures, theIndian Government completed thedevelopment
ofstandard bidding documents based ontheWorld Bank'sprocurement guidelines, 1995/96, in
July1997. India hasalsoadapted toIndian conditions, theWorld Bank'sstandard bidding document
fortheprocurement ofgoods, works, supply andinstallation, andpharmaceuticals andvaccines, and
hasfinalized national competitive bidding documents foruseinWorld Bank funded projects inIndia.
TheIndia-specific standard bidding documents areexpected alsotobeusedincontract/procurement
manuals forGovernment Ministers andDepartments.
87. Although these arebeing phased out,anumber ofpreferred sources exist forsupplies of
procurement. Policy places anemphasis onpurchases being made frompublic sector enterprises and
from thesmall-scale sector inorder toensure theirviability inthelongrun. Thus, procurement of
405specified products mustbefromthesmall-scale sector, including 75items thatmaybeprocured
fromthehandicraft andhandloom sector. Apricepreference ofupto15percentapplies toprocurement
fromthesector onatender-to-tender basisdepending onwhether thesmall-scale unithassuccessfully
secured contracts bycompeting onanon-preferential basis withlarge-scale units.
88. Since 1993, therehasbeenagradual elimination inpreferences forprocurement fromthepublic
sector. Price preferences forthesector were eliminated inJanuary 1992 andthenumber ofitems
exclusively reserved forprocurement from thepublic sector wasreduced from eight tosix,namely
coal,armsandammunition, mineral oils,atomic energy, minerals related toatomic energy, andrailway
transport. Mining ofironore,manganese ore,chrome ore,gypsum, sulphur, goldanddiamonds,
copper, lead, zinc, tin,molybdenum andwolfram wereremoved fromthelistofindustries reserved
forthepublic sector in1991.
(xiii) Local-content schemes
89. ThePhased Manufacturing System (PMP), which required firms toagree toalistofcomponents
thatwould progressively be"Indianized", wasdiscontinued fornewprojects in1991, andhasnolonger
beenapplicable forolder projects since 1994. However, since 1995, Memoranda ofUnderstanding
49According totheauthorities, limited tenders areadopted onlyunder stringent conditions andwhen sufficient
reason exists toindicate thatitmaynotbeinthepublic interest tocallfortenders byadvertising.
50Toqualify as"indigenous equipment" atleast20percentvalue must beadded totheequipment inIndia.India WT/TPR/S/33
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(MOU) withtheDirector General ofForeign Trade havebeenrequired fromcarmanufacturers seeking
import licences forCKD/SKD kitsontherestricted list. Theauthorities statethattheterms and
conditionsoftheMOUdifferbetweencompanies:however,itisreportedthatsuchmemorandagenerally
contain provisions toindigenize production.51InDecember 1997, theterms ofsuchMOU were
standardized andcertain conditions relaxed, although noprecise information hasbeenmade available.
Other schemes suchastheDutyExemption Scheme andarrangements for100percentexport oriented
unitsimplicitly require manufacturers tomeetprescribed levels ofdomestic value added tobeeligible
forbenefits (Table III.4).
(xiv) Anti-dumping andcountervailing measures
90. Authority tointroduce anti-dumping andcountervailing measures isintheCustoms Act,1975
asamended bytheCustoms Tariff (Amendment) Act,1995. TheActwaspassed tobring Indian
legislation oncountervailing andanti-dumping actions intoconformity withtheWTO Agreements on
Subsidies andCountervailing Measures andImplementation ofArticle VIoftheGeneral Agreement
onTariffs andTrade 1994. TheActcame intoforce on1January 1995.52
91. Under theAct,theCentral Government hasauthority toimpose ananti-dumping dutyongoods
imported intoIndia atlessthantheir"normal" value. Theanti-dumping dutymaynotbegreater than
thedifference between theexport price ofthegood anditsnormal value. Aprovisional dutybased
onestimates ofsuchvalue canbeimposed pending thefinaldetermination ofdumping ineachcase,
andinthecaseofadifference between theprovisional andfinaldutytheexcess shallberefunded to
theproducer. Provisional duties maynotexceed themargin ofdumping andmustbeimposed within
60daysofthepublic notice indicating initiation oftheanti-dumping investigation bytheauthorities.
Provisional duties mayremain inforce forsixmonths, extendable toninemonths.
92. Ananti-dumping investigation isconducted bytheAnti-Dumping Authority intheMinistry
ofCommerce andmustbeterminated within oneyearofthedateofinitiation; atthatpointtheAuthority
isrequired tosubmit totheCentral Government details oftheexport price, normal value andthemargin
ofdumping, andwhether injury hasbeencaused tothedomestic industry. Individual dumping margins
willbedetermined foreachproducer under investigation. Thefinalfindings mustbeavailable within
oneyearfrom thedateofinitiation oftheinvestigation andtheimposition ofthefinaldutymustbe
made bynotification intheOfficial Gazette.
93. Once finalaction hasbeentaken, theanti-dumping dutyimposed automatically expires after
fiveyears, ifnotrevoked earlier; however, theCentral Government mayrenew, upon review, the
dutyforafurther period offiveyears ifitisbelieved thatthere willbecontinued dumping orinjury.
Iftheinitial fiveyears expire while areview isinprogress theanti-dumping dutycanbeextended
foramaximum period ofoneyear.
94. India'scountervailing legislation requires theinvestigating authority toissueapublic notification
aswellastoinform theexporting country uponinitiation ofaninvestigation. Theinvestigating authority
isthedesignated authority. Theprocedures followed aresimilar tothose under ananti-dumping
investigation; theyinvolve determination ofmaterial injury andalinkbetween injury caused andthe
imported goods. Theauthority mustgiveitsfinalfindings within oneyearfromthedateofinitiation
51USTrade Representative (1997).
52Notification byIndia totheWTO: documents G/ADP/N/1/IND/2, G/ADP/N/1/IND/2/Corr.1 and
G/ADP/N/1/IND/2/Suppl.1.WT/TPR/S/33 Trade Policy Review
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ofthecaseandfinaldutymust beimposed within three months ofthedateofpublication ofthese
findings. Thecontinued needforthedutymustbereviewed bytheCentral Government within ayear
ofimposition ofthefinalduty.
95. Appeals against ananti-dumping orcountervailing dutycanbemade totheCustoms, Excise
andGold (Control) Appellate Tribunal andmustbefiledwithin ninety daysofthedateofimposition
oftheduty. Oneappeal hasbeenmade sofar,under these provisions. Theappeal, filedin1996,
wasnotaccepted bytheTribunal.
96. India'sfirstprovisional anti-dumping duties wereimposed in1993 against fiveproducers for
PVCresin. Since thenIndia hasinitiated atotalof45anti-dumping cases, covering 18products, with
definitive duties imposed on11cases.53Aruling ofnoinjury wasreached intwocases (Table III.14).
Nocountervailing duties were imposed during thesame period.
97. AswithmanyotherdevelopingcountriesIndiahasbecomeafairlyactiveuseroftheanti-dumping
mechanism. Thetotalnumber ofanti-dumping cases initiated between 1995 andendofJune1997
was37,including fivereviews, compared to16fortheperiod between 1992 and1995. Dumping
allegations havealsobecome more common among industrialists especially intraditionally protected
sectors suchaschemicals. Evidence thattheauthorities anticipate agreater number ofanti-dumping
cases inthefuture isclearintheExport andImport Policy 'sintention tostrengthen theanti-dumping
cellintheMinistry ofCommerce andtoupgrade ittoananti-dumping directorate.54
Table III.14
Anti-dumping actions, upto30June 1997
Product Exporting country Date ofinitiationProvisional Measures Final Measures
Date, dumping
marginsaDate, dumping
marginsa
Antidumping cases
PVC resin Argentina 10/06/1992 02/02/1993
(Rs1,050/mt)Noinjury
(18/01/94)
PVC resin Brazil 10/06/1992 02/02/1993
(Rs2,490/mt)18/01/1994
(Rs2,036/mt)
PVC resin Mexico 10/06/1992 02/02/1993
(Rs2,070/mt)18/01/1994
(Rs1,619/mt)
PVC resin Korea 10/06/1992 02/02/1993
(Rs1,700/mt)18/01/1994
(Rs1,253/mt)
PVC resin United States 10/06/1992 02/02/1993
(Rs1,970/mt)18/01/1994
(Rs504/mt)
Styrene butadiene rubber Republic ofKorea 12/08/1992 Noinjury
(17/02/1993)
Styrene butadiene rubber Japan 12/08/1992 Noinjury
(17/02/1993)
Bisphenol-A Japan 12/08/1992 10/08/1993
(8.9% ofcifvalue)11/03/1994
(Rs7,477/mt)
Isobutyl Benzine China 07/01/1994 20/09/1994
(Rs13,809/mt)31/08/1995
(Rs10,634/mt)
3,4,5 TMBA China 11/08/1994 20/03/1995
(Rs237/kg)20/10/1995
(Rs237/kg)
Theophylline China 30/08/1994 31/01/1995
(Rs108/kg)30/10/1995
(Rs108/kg)
Caffeine China 30/08/1994 31/01/1995
(Rs101/kg)20/10/1995
(Rs101/kg)
Table III.14 (cont'd)
53Four ofthese cases arereviews ofanti-dumping cases initiated in1992.
54Economic Times, 4April 1997.India WT/TPR/S/33
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Product Exporting country Date ofinitiationProvisional Measures Final Measures
Date, dumping
marginsaDate, dumping
marginsa
Acrylointrile butadiene rubber (NBR) Japan 28/10/1994 14/11/1995
(Rs19,306/mt))
Potassium permanganate China 30/12/1994 05/09/1995
(Rs5,992/mt)
Bisphenol 'A' Brazil 30/12/1994 30/08/1994 26/12/1995
(Rs10,263/mt)
Bisphenol 'A' Russia 30/12/1994 05/09/1995 26/12/1995
(Rs12,559/mt)
Acrylonitrile butadiene rubber (NBR) Germany 15/03/1995 31/01/97
(174.15%)
Acrylonitrile butadiene rubber (NBR) Korea 15/03/1995 31/01/97
(24.62%)
Deadburnt magnesite China 15/05/1995 10/06/1996 20/12/1996
Lowcarbon ferro chrome Kazakhstan 06/06/1995 23/05/1996
Lowcarbon ferro chrome Russian Federation 06/06/1995 23/05/1996
Lowcarbon ferro chrome Ukraine 06/06/1995
Sodium ferrocyanide China 11/10/1995 20/12/1996
Bisphenol 'A' USA 20/11/1995 27/11/1996
(US$ 1,253/mt)
8HQ China 04/03/1996 16/10/1996
(US$ 9.30-9.74/kg)
CatalystsbDenmark 06/09/1996 20/06/97
(0-153.97%)
Acrylic Fibres Republic ofKorea 13/09/1996 25/04/97
(40.69%)
Acrylic Fibres Thailand 13/09/1996 25/04/97
(18.47%)
Acrylic Fibres USA 13/09/1996 25/04/97
(0-64.29%)
Graphite Electrodes Austria 30/09/1996
Graphite Electrodes Belgium 30/09/1996
Graphite Electrodes China 30/09/1996
Graphite Electrodes France 30/09/1996
Graphite Electrodes Germany 30/09/1996
Graphite Electrodes Italy 30/09/1996
Graphite Electrodes Spain 30/09/1996
Graphite Electrodes USA 30/09/1996
PVC Resin (revew) Brazil 30/09/1996
PVC Resin (review) Republic ofKorea 30/09/1996
PVC Resin (review) Mexico 30/09/1996
PVC Resin (review) USA 30/09/1996
Newsprint Canada 20/12/1996
Newsprint Russia 20/12/1996
Newsprint USA 20/12/1996
PTA Indonesia 20/12/1996
PTA Republic ofKorea 20/12/1996
PTA Thailand 20/12/1996
Bisphenol 'A'(review) Japan 30/12/1996
Acrytonitrile butadiene rubber (NBR) Germany 15/03/1996 31/01/97
(174.15%)
Acrytonitrile butadiene rubber (NBR) Korea 15/03/1996 31/01/1997
(24.62%)
Vitamin C
Vitamin C
Isobutyl benezeneJapan
China
China26/05/1997
26/05/1997
04/04/1997
a Dumping margins areexpressed asapercentage ofexport prices unless otherwise indicated.
b Hydrotesulpherization (32.61-85.19%), zincoxide desulphurization (76.06-90.36%), hightemperature shift(135.58-153.97%),
lowtemperature shift(100-113.90%), secondary reforming (0-152.71%) andmethanation catalysts (134.74%).
Source: WTO Secretariat; andinformation provided bytheIndian authories.WT/TPR/S/33 Trade Policy Review
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(xv) Safeguard actions
98. India doesnothaveanyoutstanding, norhasitused, GATT Article XIXsafeguard measures.
Thelegalauthority totakesuchmeasures wasestablished inFebruary 1997 withtheintroduction of
anewSection8AintheCustomsTariffAct,1975.55Section8Aprovidesfortheimpositionofsafeguard
duties onproducts causing orthreatening tocause injury tothedomestic industry. TheDirector General
forSafeguards, within theMinistry ofFinance, isentrusted withthetaskofexamining safeguard cases
andmust issue apublic notice withregard topreliminary findings; theMinistry ofCommerce and
theMinistry ofFinance mustbeinformed. Final findings mustalsobenotified bypublic notice within
eight months ofthedateofinitiation. Final safeguard duties, ifapproved, mustnotexceed theamount
thathasbeenfound adequate toprevent orremedy serious injury andmustbenotified bytheCentral
Government intheOfficial Gazette. Final safeguard duties willexpire afterfouryears fromthedate
ofimposition.56India notified initiation ofitsfirstsafeguard investigation inJanuary 1998.57
(xvi) Measures implemented inexporting countries
99. Indian companies arenotparty toanyrestraint agreements withforeign countries torestrict
imports intoIndia.
(xvii) Balance-of-payments measures
100. India hasformany years claimed cover under GATT Article XVIII:B, onrestrictions for
balance-of-payments reasons, foritslicensing measures onimports, particularly ofconsumer goods,
andhasconsulted regularly intheCommittee onBalance-of-Payments Restrictions. InMay1997,
India presented totheCommittee aplanforeliminating these restrictions, inthree phases, eachof
three years, starting on1April 1997. Under theproposal, 704tariff lineswereincluded inthefirst
phase, from 1April 1997 to31March 2000; 1,216 lines inPhase II,from 1April 2000 to
31March 2003andtheremaining 794linesinphase IIIfrom1April 2003to31March 2006.58The
planwasconsidered bytheCommittee onBalance-of-Payments Restrictions inJune-July 1997; in
theresumed meeting inJuly, India presented arevised phase-out programme covering seven years,
with most restrictions removed insixyears asaresult ofthedivergence ofopinion among
WTO Members on,interalia,thelength oftheplan, andthejustification forthemeasures. Itwas
agreed toconclude theconsultations without consensus onarecommendation totheGeneral Council.59
Subsequently,Australia,Canada,theEuropeanCommunities,NewZealand,SwitzerlandandtheUnited
States requested dispute settlement consultations withIndia; pursuant tothese consultations, bilateral,
mutuallyagreedsolutionswerereachedwithAustralia,Canada,theEuropeanCommunities,NewZealand
andSwitzerland aswellaswithJapan which hadthirdparty interests. These understandings envisage
theeliminationofquantitativerestrictions,includingonimportsoftextilesandclothing,with1,137tariff
55WTO document SG/N/2/IND/2, 31August 1995.
56Unless theCentral Government isoftheopinion thatasafeguard dutyshould continue tobeimposed for
helping thedomestic industry toadjust, inwhich caseanextension canbegranted fornotlonger thantenyears
from thedateofimposition.
57WTO document SG/N/6/IND/1, 7January 1998.
58WTO document, WT/BOP/N/24, 22May 1997.
59WTO document WT/BOP/R/32, 18September 1997.India WT/TPR/S/33
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lines inPhase I(1April 1997 to31March 2000), 1,149 tariff lines inPhase II(1April 2000 to
31March 2002) and428tariff linesinPhase III(1April 2002 to31March 2003). Attherequest
oftheUnited States, apanel wasconstituted inNovember 1997toexamine theallegation thatcontinued
maintenance ofquantitative restrictions byIndia isinconsistent withitsobligations under theWTO
Agreement (Chapter II(6)(v)).
(xviii) Import privileges extended tofree-trade zones
101. Export-processing zones (EPZs) form animportant component oftheGovernment 'spolicy
toincrease India'sexports. Approval forsetting upinanexport-processing zoneisgiven bythe
Development Commissioners oftheEPZs, andbytheSecretariat forIndustrial Approvals inthecase
of100percentExport Oriented Units. Ifaproposal meets theconditions forautomatic approval,
clearance isgiven within 15days. Inother cases, itnormally takes theauthorities 45daystoclear
theproposal. Foreigners aretreated onanequal basis withIndians andnon-resident Indians.
102. 100percentEOUs areprovided thesame privileges asother firms operating inEPZs butthey
areoffered wider locational options tosuittheirinput, technological, employment andinfrastructure
needs. They tendmainly tobeconcentrated inthetextiles andyarns, foodprocessing, agriculture,
aquaculture, engineering, chemicals, electronics, andmineral oressectors. AsofMarch 1997, there
were513unitsoperational intheEPZs andafurther 1,042 EOUs. EOUs andtheEPZs together showed
a32percentincrease inexports in1996/97, compared tothenational average of10.5percentin
thesame year.
103. EOUs andfirms inEPZs arealsogiven special import privileges including:
- duty-free import ofallimportable goods (except prohibited items ontheNegative List
ofImports andBasmati paddy/brown rice), including capital goods; and
- EOUs engaged inagriculture, animal husbandry, floriculture, horticulture, pisciculture,
viticulture, poultry orsericulture, mayonlyimport goods freeofcustoms dutyif
accompanied byaCustoms Notification.
104. India'sExport, Trading, StarTrading andSuper StarTrading Houses aregranted access to
Special Import Licenses (SILs) forimports.60InJuly1997, therewerefiveSuper StarTrading Houses,
39StarTrading Houses, 321Trading Houses and2157 Export Houses. Thetotalestimated exports
bythese Houses wasRs865billion in1996/97.
(3) Measures Directly Affecting Exports
(i) Registration anddocumentation
105. Most exporters mustregister withtheDirector General ofForeign Trade (DGFT) toobtain
anImporter-Exporter Code (IEC) number, inorder thattheymayengage ininternational trade.
Exporters exempt from thisrequirement arethose covered byClause 3(2)(except (i)and(k))ofthe
Foreign Trade (Exemption fromApplication ofRules inCertain Cases) Order, 1993; Ministries and
60Theeligibility criterion forthese Houses isbased either onthef.o.b./net foreign exchange value ofexports,
made directly bytheexporter, during thepreceding three licensing years, orthepreceding licensing year, at
theoption oftheexporter (Government ofIndia, 1997d).WT/TPR/S/33 Trade Policy Review
Page 78
Departments oftheCentral orStateGovernments; persons exporting goods fortheirpersonal use,not
connected withtradeormanufacture oragriculture; andpersons exporting goods toNepal orMyanmar
(provided thatthec.i.fvalue doesnotexceed Rs25,000).61
106. Theapplication foranIECnumber must besupported by(i)aprofile oftheexporter which
includes information regarding thePermanent Account Number (PAN) ofIncome Tax;(ii)bankreceipt
ordemand draftevidencing payment ofapplication feeofRs1,000; (iii)certificate fromtheapplicant 's
banker that(s)he maintains anaccount withthebank; and(iv)twopassport sizephotographs ofthe
applicant attested bythebanker. TheDGFT maysuspend orstrike offanyregistered exporter who,
intheviewoftheDGFT, hasinfringed thelaworwhohasengaged incommercial transactions causing
severe harm toIndia'sexternal trade relations.
107. Atrader wishing toobtain alicence toexport arestricted good(ontheNegative ListofExports)
ortoreceive anyconcession granted under theExport andImport Policy 1997/98-2001/02, isrequired
tofurnish aRegistration-cum-Membership Certificate (RCMC).62TheRCMC isissued bytherelevant
Export Promotion Council (EPC), oriftheproduct isnotcovered byanyEPC, bytheregional licensing
authority concerned.63Licence application feesarelevied according tothevalue ofexports; rates
inApril 1997ranged fromRs200toRs150,000.64There isnodeposit oradvance payment requirement
associated withtheissuance ofanexport licence.
108. OtherdocumentsrequiredforthepurposeofobtaininglicencesforexportofitemsintheNegative
Listareexport orders andend-users 'certificate incases ofdual-use chemicals, special materials,
equipment andtechnologies.
(ii) Preshipment inspection andquality control
109. TheExport (Quality Control andInspection) Act,1963, empowers theGovernment tomake
goods forexport subject toquality control andinspection; specify thetypeofquality control and
inspectionappliedtosuchcommodities;andprohibittheexportofthesecommoditiesunlessaccompanied
byacertificate ofexport worthiness issued byoneoftheInspection Agencies recognized under the
Act. TheExport Inspection Council ofIndia (EIC), astatutory council setupunder theAct,is
responsible fortheenforcement ofquality control andanynecessary inspection ofthese commodities
prior toexport.
110. Some 988items ofengineering, chemicals andallied products, foodandagricultural products,
juteandjuteproducts, coirandcoirproducts, footwear andfootwear components, cashews, andfish
andfishery products, arecurrently covered bytheCompulsory Quality Control Inspection system;
coverage hasremained approximately thesame since India'sprevious Review, when 995items were
61Government ofIndia (1997d), Chapter IV.
62Government ofIndia (1997d), Chapter XI.
63Government ofIndia (1997d), Chapter XIII.
64Sixadditional feesarelevied: application forduplicate licence (Rs200); Speed Post(Rs200); application
foranidentitycard(Rs200);applicationforaduplicateIdentityCardintheeventoflossoforiginalcard(Rs100);
extension oftheperiod ofshipment ofanimport licence (Rs200); andapplication forasplit-licence (Rs1,000 per
licence);andapplicationforlicenceunderDutyExemptionPassbookScheme(Rs5per1,000,subjecttoaminimum
ofRs200).India WT/TPR/S/33
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subject tocontrol. Eggproducts werebrought under theCompulsory Quality Control Inspection System
in1997.
111. Thebulkofpreshipment inspection isundertaken byfiveexport inspection agencies (EIAs).65
Inspections arecarried outeither onaconsignment basis(inspection ofasample oftheconsignment),
byin-process control (theresponsibility isonthemanufacturer andprocessors toensure quality, with
random checks made bytheagency), orbyself-certification (available tomanufacturers passing stringent
requirements andguidelines laiddown bytheGovernment). During 1996/97, exports valued at
Rs16.4billion werecertified under theseschemes. TheEIAsalsoundertake inspection onavoluntary
basis, where desired, byforeign buyers. Moreover, theEIAshavebeenauthorized toissuecertificates
oforigin under theGeneralized System ofPreferences (GSP) forexports toCanada, eastEuropean
countries, theEU,Japan andtheUnited States.66During 1996/97, almost halfamillion suchorigin
certificates wereissued bytheEIAs. Inaddition, theEIAs areauthorized toissuecertificates oforigin
under GSTP, SAPTA andtheBangkok Agreement.
112. Intandem withtheliberalization oftheIndian economy, theneedforquality control and
preshipment inspection appears tohavediminished, e.g.theadoption ofamarket-determined exchange
ratereduces thebenefits fromunder-invoicing exports (BoxIII.1). Toshiftsome oftheresponsibility
forensuring thequality ofexports totheexporters, compulsory control andpreshipment inspection
systems weresimplified andstreamlined. Among themeasures introduced weretheexemption from
thecompulsory preshipment inspection ofallproducts ofStarandSuper StarTrading Houses, Trading
Houses andExport Houses, industrial units setupintheexport-processing zones, and100percent
Export Oriented Units (section 2(xviii) and3(xv)).67
BoxIII.1: Diminished roleforpreshipment inspection inaliberalized environment
Preshipment inspection services arewidely usedindeveloping countries (about 30countries in1993). In
theearly years oftheindustry 'sexistence (1963 tomid-1980s), services were heavily focused on
addressing capital flight. Over-invoicing ofimports wasoften usedtocircumvent exchange controls and
foreign currency rationing. Inmore recent years, liberalization oftrade regimes, aswellasremoval of
capital controls, hasdrastically reduced theneed foraddressing over-invoicing ofimports. Instead,
preshipment services have shifted toactivities related tocustoms revenue. Inacountry withrelatively
highcustoms duties, theincentives fortraders tounder-invoice imports could besignificant.
Some oftheother reasons forover-invoicing ofimports and/or under-invoicing ofexports areblack
market arbitrage, transfer ownership ofassets, evasion ofdirect andexport taxes, andtransfer ofillicit
funds; over-invoicing ofexports could beused tocapture export subsidies.
Source: Low (1995), Preshipment Inspection Service, World Bank Discussion Papers, No.278.
65TheGovernmenthasalsorecognized21privateinspectionagenciesandsevengovernmentinspectionagencies
toundertake quality certification. Moreover, 15agencies have been recognized forthefumigation ofexport
cargo. Inorder tomeet thedemand fortesting ofengineering products, particularly from thesmall-scale sector,
theEIChassetupaPilot TestHouse atBombay.
66TheGovernment hasnominated nineauthorities forissue ofGSPcertificates oforigin; EICisoneofthem.
EIAs, being thefield organizations, issue GSPcertificates oforigin onbehalf oftheEIC.
67GATT (1993), page 130.WT/TPR/S/33 Trade Policy Review
Page 80
(iii) Export taxes, charges andlevies
113. Under theCustoms Tariff Act,1975(Section 8),theGovernment hastheauthority tointroduce
orincrease duties onexports. Twenty-six product categories thatmaybecovered byexport "tariffs"
(duties andcesses) arelisted inSchedule IIoftheCustoms Tariff Book of1997/98; these products
include coffee, certain peppers, some tobacco, certain oresandsome textiles.
114. However, Government Notification 100of1March 1989 (asamended) exempts almost all
ofthe26categories listed inSchedule IIfromexport taxes, leaving onlysnake skins, some lambskins
andother hides andleathers, andcertain woolandleather products effectively subject toexport taxes,
which isthesame number asinIndia'sprevious Review.68Rates asat1April 1997were10percent
forsnake skins andrawfurlamb skins, and15percentforhides, skins andnon-finished leather
(equivalent to12items attheHSsix-digit level).
115. Revenuesfromexporttaxesareestimatedatsome0.11percentoftotal1997/98budgetrevenues,
compared to0.12percentin1993/94. Export taxesdonotdiscriminate between theexport destination
oftheproducts.
(iv) Minimum export prices
116. Products thatmaybecovered byminimum export prices include wheat andwheat products;
coarse grains; andstone boulders. However, minimum export prices (ofUS$18pertonne) arefixed
onlyforexports ofstoneboulders toBangladesh; allotheritems mentioned above areexportable without
anyminimum export price requirement. Atthetimeoftheprevious Review, minimum export prices
were declared forbasmati andnon-Basmati rice; cotton; andsoftandhardcotton waste.
(v) Export prohibitions, licensing andstatetrading
(a) Legal andadministrative basis
117. Thelegalandadministrative framework forexports isthesame asforimports (section 2(i)).
(b) Export prohibitions andother controls
118. Goods subject toexport prohibition arelisted intheNegative ListofExports, PartI,ofthe
Export andImport Policy 1997/98-2001/02. Thelistofprohibited items (tenitems attheHSsix-digit
level) is,bybroad categories, thesameasatthetimeofIndia'sprevious Review (Table III.15). These
prohibitions aremaintained, according totheauthorities, forsocio-cultural andenvironmental reasons
andtogiveeffect toobligations arising outofcommitments tointernational conventions suchasthe
Chemical Weapons Convention andtheConvention ofInternational Trade inEndangered Species
(CITES).
68Exports of"wool-on leather" areexempt from taxiftheyaremanufactured infree-trade zones orbyexport
oriented units.India WT/TPR/S/33
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Table III.15
Export prohibitions, 1993 and1997
Asat31March 1993 1April 1997
Allforms ofwildlifeincluding theirparts andproducts
prohibited.Allforms ofwildlifeincluding theirparts andproducts, except
peacock tailfeathers including handicrafts made thereof and
manufactured articles andshavings ofshedantlers ofchital and
sambhar.a
Prohibited Exotic birds
Prohibited, except wildfloraincluded inAppendix IIofthe
Convention ofInternational Trade inEndangered Species.Allitems ofplants included inAppendix IandIIofthe
Convention ofInternational Trade inEndangered Species, wild
orchids, aswellassome plants.a
Prohibited Beef
Prohibited Human skeletons
Prohibited Tallow, fatand/or oilsofanyanimal origin excluding fishoil
Allforms ofwood andwood products intheform oflogs,
timber, stumps, roots, barks, chips, powder, flakes, dust,
pulpandcharcoal.Wood andwood products intheform oflogs, timber, stumps,
roots, barks, chips, powder, flakes, dust, pulpandcharcoal,
except sawn timber products made exclusively outofimported
logs/timber.a
Prohibited Chemicals included inSchedule 1oftheChemicals Weapons
Convention oftheUnited Nations asspecified inthePublic
Notice issued bytheDirector General ofForeign Trade.
Prohibited, except sandalwood oil. Sandalwood inanyform, butexcluding finished handicrafts
made ofsandalwood; machine finished sandalwood products;
andsandalwood oil.a
Allforms ofredsanders wood prohibited. Redsanders wood inanyform, whether raw,preserved, or
unprocessed aswellasanyproduct made thereof, except some
value-added products ofredsanders.a
a Subject tospecification andconditions laidoutinSchedule 2,Appendix 1,2or4ofthebook "ITC (HS)Classification ofExport
andImport Items".
Source: GATT (1993), Trade Policy Review -India, andGovernment ofIndia (1997d), Export andImport Policy 1997/98 -2001/02,
Negative ListofExports, PartI.
119. Asnoted above, India maintains trade embargoes onIraq, based onU.N. Security Council
resolutions, andonFiji,withwhich ithasnodiplomatic relations. Exports ofsome equipment ofthe
oilandgasindustry toLibya areprohibited, alsobased onU.N. Security Council resolutions.69
120. Inaddition, asinthecaseofimports, theexport licensing system mayacttoeffectively prohibit
some exports.
(c) Export licensing
121. Goods subject toexport licensing arelisted intheNegative ListofExports, PartII,ofthe
Export andImport Policy 1997/98-2001/02. Bybroad categories, 31goods (equivalent to90items
attheHSsix-digit level), comprising mainly agricultural items, aresubject toexport licensing.70The
69Government ofIndia (1997d), Chapter IV.
70Goods subject toexport licensing are,bybroad category: beche-de-mer; cattle; camels; fertilizers;
dress materials withimprints oftheHoly Quran; some de-oiled groundnut cakes; some silver pomfrets; fur
ofdomestic animals; fodder; hides andskins; horses; mineral oresandconcentrates; pasewa; pulses; paddy;
ricebran; seeds andplanting materials; some seashells; some seaweeds; silkworms; vegetable andgroundnut
(continued...)WT/TPR/S/33 Trade Policy Review
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number ofgoods areabout thesameasatthetimeofIndia'sReview in1993(Table AIII.4). Since 1993,
metalsandtheircompoundshavebeende-licensed,whileimportedsugar,andsomematerials,equipment,
andtechnologies havebecome subject tolicensing.71Asasignatory totheMontreal Protocol, India
restricts, through licensing, chemicals included inAnnexure AandBtotheProtocol onsubstances
thatdeplete theozone layer. Other licensing restrictions aremaintained, according totheauthorities,
forsecurity, socio-cultural orenvironmental reasons, conventions, including under major international
conventions, andtoensure domestic availability ofsome rawmaterial.
(d) State trading (canalization)
122. Exportation ofsome items iscanalized through designated state-trading agencies. Aswith
imports, exports ofthese items mayalsobeundertaken byaprivate trader against alicence granted
bytheDirector General ofForeign Trade (DGFT). However, onlysmall amounts ofcanalized items
havebeenexported byprivate exporters.
123. Thenumber ofcanalized goods, bybroad categories, hasdecreased since India'slastReview,
from seven tosix(equivalent to23items attheHSsix-digit level) (Table AIII.5). Since 1993 milk
products havebeende-canalized, andsome sub-items within thebroad category ofmineral oresand
concentrates havebeenadded orremoved. Goods nowsubject toexport canalization are:petroleum
products, gumkaraya, micawaste, mineral oresandconcentrates, niger seeds, andonions. Canalized
exports asashare oftotalmerchandise exports fellduring the1990s from 5.9percentin1990/91
to2.9percentin1996/97 (Chart III.6andTable AIII.6).
70(...continued)
oil;vintagemotorcarsandmotorcycles;viscosestaplefibre;humanbloodplasma;wastepaper;somechemicals;
imported sugar; some materials andequipment; andchemicals included intheMontreal Protocol.
71Asspecified inSchedule 2,Appendix 6ofthebook "ITC (HS)Classifications ofExport andImport items".India WT/TPR/S/33
Page 83
(vi) Export quotas
124. Currently, seven items aresubject toexport quotas: nondurum wheat (forsupply tothe
InternationalRedCrossSociety,Peshawar/UnitedNationsWorldFoodProgramme)andwheatproducts;
manufactured articles andshavings ofshedantlers ofsambhar andchital; powder milk(skimmed or
fullcream/whole) andinfant milkfood; grainandflourofcoarse grains; peacock tailfeathers, including
handicraft items andarticles made thereof; brown seaweeds andagarophytes, excluding G-edulis
ofTamil Nadu Coast origin inprocessed form; andsugar. AtthetimeofIndia'sprevious Review
in1993, bybroad category, sixproducts were subject toexport quotas, including some cotton and
certain grains.72
72These goods were, bybroad category: brown seaweed andAgarophytes, excluding G-edulis andTamil
Nadu coast origin inprocessed form; rawandyarncotton; awiderange ofgrains; peacock tailfeathers including
handicrafts andarticles made thereof; sunflower seeds; andmeat ofIndian sheep andIndian goat.WT/TPR/S/33 Trade Policy Review
Page 84
(vii) Export cartels
125. Indian lawoncompetition (Monopolies andRestrictive Trade Practices (MRPT) Act,1969,
Section 15)explicitly states thatnoorder made withrespect toanymonopolistic orrestrictive trade
practice shalloperate "torestrict therightofanyperson toexport goods fromIndia, totheextent that
themonopolistic orrestrictive tradepractice relates exclusively totheproduction, supply, distribution
orcontrol ofgoods forexport".
(viii) Voluntary restraints, surveillance andsimilar measures
126. According totheIndian authorities, outside theareaoftextiles andclothing, India doesnot
participate inanyarrangements designed tocurborcontrol exports tothirdmarkets attherequest of
foreign governments. Under theWTO Agreement onTextiles andClothing, India maintains restraint
agreements oncertain exports oftextiles andclothing toCanada, theEuropean Union, Norway and
theUnited States.
(ix) Measures maintained byimporting countries
127. India closely monitors other countries 'measures thatitbelieves restrict itsexports. Pakistan
limits private sector imports toalistof595items (down from 5,464 in1995) attheHSeight-digit
level.73Allother imports from India areprohibited.74Other areas ofconcern include quantitative
restrictions, standards, subsidies, anti-dumping measures, countervailing duties, andvisarestrictions.
According totheauthorities, India'sexports oftextiles, marine products, professional services, certain
agricultural items andcertain engineering items areseverely constrained bythesemeasures. Therelevant
non-tariff barriers (NTBs) aresummarized below andacomplete listofmeasures, asdescribed by
theauthorities, isprovided inTable AIII.7.
- specific quantitative restrictions ontextiles andclothing cover alargeshare ofIndia'sexports.
Theshare oftextiles andclothing exports totheUnited States affected bythequotas increased
from 16percentin1986 to89percentin1996;
- steel, clothing andtextile products areamong theproducts affected byanti-dumping and
countervailing actions. Actions taken bytheUnited States, theEU(India 'stwolargest export
markets) andother countries since November 1990 arelisted inTables AIII.8 andAIII.9;
- export constraints onagricultural products include regulations related toseafood, (section 609
ofPublicLaw101-162oftheUnitedStatesprohibitsimportsofshrimpsthathavebeenharvested
withtechnology thatmayadversely affect seaturtles); highstandards forpesticide residues
onmangoes, bananas, grapes andpotatoes (EU, Japan andtheUnited States) andsesame and
tobacco (Japan); hormones inlivestock production (EU); andtariffratequotas onmushrooms
(EU); and
- exports ofprofessional services involving movement ofpersons, areconstrained byrestrictive
visarequirements.
73Until recently, Pakistan limited imports from India toatotalof573items attheHSeight-digit level. With
effect from 1March 1997, Pakistan hasallowed imports from India ofpharmaceutical rawmaterials andpacking
materials usedexclusively inthemanufacture ofdrugs. Pakistan alsoallowed imports of14additional items
inthefiscal year1997/98.
74Academy ofBusiness Studies (1997), Appendix A,VII.India WT/TPR/S/33
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(x) Export subsidies
128. India doesnotprovide direct subsidies toexporters. Instead, asdescribed below, India relies
onawide range ofindirect subsidies, including dutyandtaxconcessions, export finance, export
insurance andguarantee, andexport promotion andmarketing assistance.
(xi) Duty andtaxconcessions
129. Exporters benefit fromaplethora ofdutyconcessions onimported inputs, rawmaterials and
capital goods, which according totheauthorities areaimed atneutralizing theduties paidontheseitems.
Thefeatures oftheschemes aredescribed insection(2)(iii)(e) andsummarized inTable III.4.
130. Export income isexempt fromincome taxes (Section 80HHC oftheIncome TaxAct,1961).
Dataarenotavailable ontheamount offorgone revenue attributed totheexemption.
(xii) Export finance
131. Commercial banks provide administered export financing ratesofinterest, below market rates.
Theannual lending ratesareprescribed bytheReserve BankofIndia. Commercial banks donotreceive
subsidies fromtheGovernment tofinance these loans. Commercial banks arealsorequired toextend
aminimum of12percentoftheirnetcredit asexport credit.
(xiii) Export insurance andguarantees
132. Theobjective ofthewholly government-owned Export Credit Guarantee Corporation ofIndia
Limited (ECGC) istoprovide exporters arange ofinsurance cover against theriskofnon-realization
ofexport proceeds duetopolitical orcommercial reasons, andtoprovide guarantees tofinancial
institutions tofacilitate thegranting ofcredit facilities toexporters onaliberal basis.75
133. TheECGC isaservice organization, withprofit notbeing thesolemotive. Recently, its
operation hasshown surpluses, provisionally estimated atRs19.1million in1996/97. Thecapital
contribution from theGovernment wasincreased toRs750million on31March 1997, andfurther
enhanced toRs1.5billion during 1997/98. Itsactivities haveexpanded since theearly 1990s. The
accumulated value ofexports covered byECGC policies, special schemes andguarantees increased
from Rs550billion in1991/92 toRs1,522 billion in1996/97. Over thesame period, thevalue of
claims paidrosefrom Rs1,054 million toRs2,030 million.76
134. There hasbeennochange intheinsurance cover made available byECGC sinceIndia'sprevious
Review in1993. TheECGC provides fourmain types ofinsurance cover:
-standard export policies, covering exporters against non-payment when trading oncash
terms oronshort-term credit using billsofexchange. Themaximum period ofshort-term
credit isusually 180daysfromthedateofshipment. Thepolicies cover commercial and
political riskatamaximum rateof90percentoftheexporter 'sloss,either fromthedate
ofshipment orthedateofcontract. Premiums aresetaccording tothecountry ofexport,
increasing withthelength ofcredit. TheECGC setsannual limits onthemaximum liability
75Government ofIndia (1996o).
76Government ofIndia (1996o), Appendix XIV.WT/TPR/S/33 Trade Policy Review
Page 86
ofthecoverage ofpayments, taking intoaccount theexporter 'sprevious turnover and
payment arrangements. TheECGC requires theexporter toofferforinsurance allexport
shipments tobemade during thefollowing twoyears;
-specific policies covering contracts forexports ofgoods, turnkey projects, construction
works orrendering services abroad which arenotofarepetitive nature andinvolve
medium-/long-termcreditsbesidesIndianoverseasinvestment,areinsuredonacase-to-case
basis;
-ECGC credit guarantees, covering short-term exports, including packing orpreshipment
andpost-shipment financing, aswellasproject andtermexports. These guarantees, which
areextended tobanks andfinancial institutions, reimburse upto85percentoflosses; and
-protection against exchange ratefluctuations fordeferred receivables from thedateof
abidupto15years aftertheaward ofthecontract. Thecoverage isprovided inAustralian
dollars, deutsche marks, French francs, Japanese yen,pounds sterling, Swiss francs,
U.A.E. dirhams, andU.S.dollars. Forpayments specified inother currencies, thecover
isprovided atthediscretion oftheECGC.
135. According totheauthorities, theshort-term insurance services aswellasthecredit guarantee
business havebeenfound viable. Intheprogrammes covering medium- andlong-term exports, ECGC
hashadtomeetsubstantial claims leading tonegative results.
(xiv) Export promotion andmarketing assistance
136. TheGovernment places strong emphasis onfacilitating export promotion andmarketing
assistance. Organizations involved arelisted inTable AIII.10. Since India'slastReview, some new
schemeshavebeenestablished,increasingthenumberofschemes,bybroadcategories,to15in1997/98.
137. Among thenewprogrammes istheIndian Brand Equity Fund, promoting theimage and
marketing ofgeneric Indian export products withproven quality.77TheExport Promotion Industrial
Parks (EPIP) scheme, introduced inAugust 1994, withaview toinvolving State Governments in
contributing toIndia'sexport efforts, provides financial assistance totheStateGovernments tofinance
infrastructure;theseparksareowned,managed,andmaintainedbytheStateGovernmentseitherdirectly
orthrough itsagencies, withupto75percentofthecost(toamaximum ofRs0.1billion) provided
bytheCentral Government. AsofApril 1997, theCentral Government hadapproved 18proposals
indifferent States forsetting upEPIPs.78
(xv) Free-trade zones
138. With theobjective ofpromoting exports, theGovernment hasestablished free-trade zones or
export-processing zones (EPZs). Oftheseven EPZs, theSantacruz Electronics EPZisdesigned
exclusively forexport ofelectronics, gems andjewellery, whereas theother zones aremulti-product
zones. Hundred percentexport oriented units(EOUs), which aremeant tobecomplementary tothe
EPZs, canbeestablished outside thezones (section 2(xviii)). Topromote thedevelopment andexports
ofthesoftware industry seven Software Technology Parks (STPs) andanElectronic Hardware
Technology Park(EHTP) Scheme areinplace.
77Government ofIndia (1996o).
78Academy ofBusiness Standards (1997), Appendix B5.India WT/TPR/S/33
Page 87
139. Each ofthezones provides basic infrastructure, suchasdeveloped landforconstruction of
factory sheds, standard-design factory buildings including ready-built sheds, roads, power, water supply
anddrainage. Inaddition, customs clearance isarranged atthezoneatnoextra charge. TheEOUs
must provide theirowninfrastructure. While theEPZunits broadly fallunder theproduct groups
ofelectronics, engineering items, chemicals andallied products, gems andjewellery, textiles and
garments, plastics andrubber products, EOUs areconcentrated intextiles andyarns, foodprocessing,
agriculture, aquaculture, engineering, chemicals andplastics, granites, electronics, andminerals/ores.79
AsofMarch 1996, 511unitswereinoperation intheEPZs, and704under theEOUscheme. Combined
exports bytheEPZs, EOUs, STPs andEHTPS wereabout Rs33,978 million, equivalent to3percent
oftotalexports in1996/97.
140. Awiderange ofbenefits areextended totheEPZs, EOUs, STPs andEHTPs. Units under
theEOU/EPL Scheme areallowed, interalia,zerodutyonimports ofrawmaterials, exemption from
excise dutyondomestic supplies; deferred payment ofcustoms dutyoncapital goods during abond
period, corporate taxholidays forablock offiveyears inthefirsteightyears ofproduction, andfacility
tosellpartoftheiroutput inthedomestic market. EHTPs andSTPs areallowed zerodutyonall
imports, 100percentforeign participation, andtaxholidays (Table III.16). Estimated government
expenditure in1997/98 fortheEPZs, isRs130million. Government expenditure fortheSTPs
during 1996/97 wasRs10million, while noexpenditure wasincurred during 1997/98. There isno
government support fortheEOUs andtheEHTPs. Dataarenotavailable ontheamount oftotalforgone
revenue attributed tothese fiscal benefits.
79Government ofIndia (1996o).WT/TPR/S/33 Trade Policy Review
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Table III.16
Keybenefits extended tofree-trade zones, 1April 1997
EOUs/EPZs STPs EHTPs
Concessional
import dutya:Defer payment ofcustoms
dutyoncapital goods during
theperiod ofbonding.
Duty-free import ofraw
materials alltypes ofgoods,
including required for
manufacture, production or
processing provided theyare
notprohibited items inthe
Negative Listofimports.Zero dutyonallimports Zero dutyonallimports
Foreign equity: Foreign equity participation
upto100% ispermissible100percent 100percent
Taxholidays: Complete taxholiday for
fiveyears inthefirst
eight years ofproduction.Complete taxholiday forfive
years inthefirsteight years of
production.Complete taxholiday forfive
years inthefirsteight years of
production.
Access to
domestic market:25percentofproduction is
permitted forclearence inthe
domestic tariff areasubject to
achievement ofthestipulated
minimum value addition inthe
Letter ofApproval/Letter of
Permission granted forsetting
uptheunitinthe
export-processing zone.
Foragro-products salein
domestic tariff areaupto
50percentofproduction
ispermissible.Saleinthedomestic market in
anymode, including data
communications, permissible
upto25percentofthe
production invalue terms.Cansellupto40percentofthe
production invalue terms of
electronic items including
components manufactured inthe
unitsubject tonetforeign
exchange earning asapercentage
ofexports. Alternatively the
units cansellonehalfofthe
value oftheirproduction onan
annual basis, inthedomestic
market andexport theother half
ofproduction invalue terms
without anyminimum foreign
exchange earning stipulation, on
payment ofapplicable duties as
specifically notified forthis
facility. Thisisaonetime
option available totheEHTP
units.
Concessional rent: Concession inlease rent
forindustrial plots andbuilt-up
factory sheds forthefirstthree
years ofproduction isgranted at
ratesbetween 25percentand
75percent, linked toearly
commencement ofcommercial
production.bNotavailable. Notavailable.
Other: Goods sourced from domestic
market aretreated asdeemed
exports eligible forexport
incentives (Table III.4).Goods sourced from domestic
market aretreated asdeemed
exports eligible forexport
incentives (Table III.4).Goods sourced from domestic
market aretreated asdeemed
exports eligible forexport
incentives (Table III.4).
a SeeTable III.4forrelated performance requirement.
b TheunitssetupintheEPZs willbeeligible forconcessional rentforleaseofindustrial plotsandstandard design factory buildings
andsheds allotted forthefirstthree years atthefollowing rates: (a)forplots, theconcession is75percentforthefirstyear,
50percentforthesecond yearand25percentforthethirdyearifproduction commenced inthefirstyearorthesecond year.
Theconcession isnotavailable forthethirdyearifproduction hasnotcommenced bytheendofthesecond year; and(b)forSDF
buildings andsheds, theconcession is50percentforthefirstyearand40percentforthesecond yearifproduction commenced
inthefirstyear. Theconcession is25percentforthethirdyearifproduction commenced inthefirstyear. Theconcession is
notavailable ifproduction hasnotcommenced bytheendofthefirstyear.
Source: Government ofIndia.India WT/TPR/S/33
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(4) Measures Affecting Production andTrade
(i) Adjustment andregional assistance
141. Themain formofadjustment assistance offered bytheGovernment isforrestructuring firms
facing financial difficulties. TheSickIndustrial Companies (Special Provisions) Act(SICA), passed
byParliament in1985, wasenacted toensure "thetimely detection ofsickandpotentially sickcompanies
owning industrial undertakings"80,andtotakewhatever action appropriate tofacilitate theirrecovery.
TheActwasamended in1991and1994. The1991amendment brought public sector companies under
thepurview oftheBoard forIndustrial andFinancial Reconstruction, theimplementing agency ofthe
SICA. In1994, anumber ofchanges were introduced, including areduction oftheminimum time
before which acompany canbedeclared sickfrom seven tofiveyears; declaring acompany tothe
Board forIndustrial andFinancial Reconstruction (BIFR) wasmade compulsory ifitsaccumulated
losses attheendofanyfinancial yearresulted inanerosion of50percentormore ofitsmaximum
networth during thefourpreceding financial years instead oftheprevious fiveyears; thenumber
ofagencies thatcandeclare apotentially sickcompany totheBIFR wasexpanded; andmonitoring
implementation oftherehabilitation scheme wasmade astatutory function oftheBoard.
142. TheBIFR isaquasi-judicial body established in1987 toimplement theSICA.81By
end-November 1997, theBIFR hadreceived 2,991 referrals of"sick" industrial units, ofwhich 2,065
wereregistered. Ofthelatter, 20.4percentwerejudged "non-sick", revival schemes wereapproved
for29.6percentand27.3percentwere recommended totheHigh Courts forclosure. Atotalof
151registered referrals wererelated topublic sector enterprises (PEs) ofwhich rehabilitation andclosure
wasrecommended for29and18percent, respectively (Table III.17).82
80According totheauthorities, industrial sickness canbecaused byinternal factors such asmanagement
difficulties, aswellasexternal factors suchasshortages ofrawmaterials, power failures, transport andfinancial
bottlenecks andmarketing problems (Government ofIndia, 1997c).
81TheBoard ofDirectors ofacompany deemed tobesickisrequired toinform theBIFR within 60days
ofthecompany'sannualaudit.TheBIFRmustattempttocompleteitsinvestigationwithin60daysofcommen cing
theenquiry. Ifitdecides thatthecompany isindeed "sick", thenitmust appoint an"operating agency", by
written order, toprepare ascheme bywhich thecompany mayberestructured. Such ascheme would normally
beprepared within aperiod of90daysandwould include measures suchasthefinancial reconstruction ofthe
firm, changes inmanagement ofthecompany, theamalgamation ofthecompany withanother company orthe
lease orsaleofapartorwhole ofthecompany. IftheBoard decides thatthefirmisunlikely tobecome viable
despite restructuring efforts, itmayforward itsopinion totheHigh Court, which canorder theclosure ofthe
firminaccordance withtheprovisions oftheCompanies Act,1956.
82According totheReserve Bank ofIndia, there areapproximately 271,206 sickindustrial units inIndia,
ofwhich 99percentaresmall-scale units (Government ofIndia, 1997c).WT/TPR/S/33 Trade Policy Review
Page 90
Table III.17
Status ofsickindustry cases referred totheBIFR asofNovember 30,1997
Total Public sector Private sector
Referrals received 2,991 209 2,782
Referrals registered 2,065 151 1,914
Dismissed asnon-maintainable 422 30 392
Rehabilitation schemes approved 611 44 567
Winding uprecommendeda563 27 536
Winding upnotice issueda65 8 57
Stayordered byCourts 38 7 31
Declared nolonger sick 197 5 192
a Figures asofDecember 31,1996.
Source: Government ofIndia (1997c), Economic Survey, 1996/97, Ministry ofFinance, NewDelhi, BIFR, NewDelhi.
143. Despite these recommendations ofclosure, noneofthefirms havebeenclosed down bythe
HighCourts. According totheauthorities, theBoard hasnojurisdiction beyond recommending closure
totherespective High Courts, unless thecaseisremanded backtotheBoard bytheCourts; nordoes
theBoard maintain information onthemembers ofcompanies where theBoard 'srecommendation for
closure hasbeenacted upon.
144. Mostregional assistance fromtheCentral andStateGovernments inIndiagoestothesmall-scale
sector, defined asunitswithamaximum permissable investment ofuptoRs30million. Thenumber
ofunits thatqualify assmall ortiny, rosefrom 2.38million in1993/94 toaround 2.86million
in1996/97, anincrease ofalmost 8percent.83Output ofthesmall-scale sector roseby11.4percent
(in1990/91 prices) between 1994/95 and1995/96 andisestimated tohaverisen by11.3percent
in1996/97. Thesmall-scale sector contributes around 40percenttogross turnover inmanufacturing
andaround 33percentoftotalexports.
145. Anumber ofpolicy measures havebeentaken tofurther develop thesmall-scale sector and
toimprove value added andquality. InMarch 1994, theGovernment launched theIntegrated
Infrastructure Development Scheme. Atotalof32projects havebeenapproved, mainly forimproving
infrastructure inrural areas.
146. Oftotalpriority banklending tothesmall-scale sector, atleast40percentisreserved forthe
tinysector, cottage industries, khadi andvillage industries andartisans (Table III.18). Concessional
finance (linked tothesizeoftheloan)isavailable through various facilities suchastheSmall Industries
Development Bank ofIndia (SIDBI) andtheRural Infrastructure Development Fund (RIDF), anda
consortium ofbanks which provides loans tothetinyandvillage sector (section (ii)(b)).84The
Government hasalso launched anumber ofspecific credit facilities forthissector under
theJawahar Rozgar Yojana andtheRozgar Yojana, providing subsidized finance tosmall-scale firms
aspartofpriority sector lending.85
83Atinyunitisdefined asafirmwithamaximum permissable investment limit ofRs2.5million.
84Reserve Bank ofIndia (1996).
85Under theRozgar Yojana, forexample, which helps tosetupmicro-enterprises especially tosupport weaker
sections ofsociety, theGovernment provides asubsidy ofupto15percentofthetotalproject costuptoaceiling
ofRs75,000 perentrepreneur (Government ofIndia, 1995b).India WT/TPR/S/33
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Table III.18
Incentives/concessions offered tosmall-scale industries (SSIs)
Fiscal Incentives Credit Others
-Excise concessions available forboth
registered andunregistered units
depending onturnover upto
Rs30million.
-TheIntegrated Infrastructure
Development Scheme launched
in1994 tostrengthen infrastructural
facilities inrural andbackward areas.
-Quality certification scheme launched
toimprove product quality. Financial
support toacquire ISO9000.
-Seven point action plantoimprove
flowofcredit toSSIs, including the
opening ofspecialized SSIbranches.
-National equity fundscope enlarged
tosupport expansion, modernization
andtechnology upgradation.
-Technology development and
modernization scheme launched
formodernization. SIDBI incharge
ofsanctioning money.
-Scheme tocreate Technology
Development Fund intheStates
launched withthehelpofState
Governments andindustry
associations.a-Priority sector lending.
-40percentoftotalcommercial bank
lending toSSIreserved fortinysector
andvillage andcottage industries.
-Refinance andother schemes
provided bytheSIDBI.
-Concessional/fixed ratesofinterest
forloans uptoRs0.2million.
-Single-window scheme forprojects up
toRs10million provided bySIDBI.
-Prime Minister 'sRozgar Yojana
provides funding formicro
enterprises.-Reservation ofproducts forSSI
(821items atpresent).
-Government purchase andprice
preferences.
-Infrastructural support to
Entrepreneurship Development
Institutes setupfortraining.
-Technology andmodernization
programme jointly funded bythe
State Bank ofIndia andSIDBI.
-Assistance toindustrial associations
andvoluntary organizations to
setuptesting centres.
-Programmes onquality awareness,
pollution control andvendor
development.
a Scheme ceases tooperate from 1997/98.
Source: Government ofIndia.
147. Other assistance programmes forregional development include theTransport Subsidy Scheme
andtheNewGrowth Centre Scheme. TheTransport Subsidy Scheme wasestablished in1971 and
wasrecently extended to31March 2000; itsaimistopromote thedevelopment ofindustries inIndia's
remote andhillyareas. Subsidies under theScheme range from 50to90percentofthecostof
transporting rawmaterials andfinished goods tothese areas. TheNewGrowth Centre Scheme was
announced in1988 andwasmeant toprovide basic infrastructural facilities such aspower,
telecommunications, water, andbanking toattract industrial development. Thusfar,71Growth Centres
areproposed tobeestablished through jointCentre-State funding.86TheCentral Government also
continued untilMarch 1996 toprovide some assistance tothe"OldGrowth Centre Scheme", which
wasdiscontinued when theNew Growth Centre Scheme wasstarted. Annual expenditure bythe
Central Government forthisscheme rosefromRs70million in1993/94 toRs804million in1994/95,
falling toRs471million in1995/96.
86Thecriteria usedtoselect theareas foreachgrowth centre include population, areaandextent ofindustrial
backwardness (Government ofIndia, 1996r).WT/TPR/S/33 Trade Policy Review
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(ii) Subsidies andtaxconcessions
(a) Subsidies
148. Although theCentral Government spends nearly 8percentofitsannual budgetary expenditure
onexplicit subsidies through itsnon-plan spending, implicit subsidies provided bybothStateandCentral
Governments areconsiderably higher. Oftheexplicit non-plan subsidies, thefertilizer industry isthe
largest recipient; however thesubsidy fordomestic andimported fertilizers hasdeclined fromaround
45percentoftotalnon-plan subsidies in1995/96 toalittleover40percentin1997/98. In1997/98,
thefoodsubsidy isexpected tobearound 41percentoftotalnon-plan subsidies largely because of
thelargergrainprocurementrequiredfortheTargetedPublicDistributionSystem(TPDS)(TableIII.19).
Another subsidy thathasrisen rapidly inrecent years isfunding forconcessional salesoffertilizers
tofarmers. In1995/96 thiswasaround 3.6percentoftotalnon-plan subsidies buthasrisento10and
11percentin1996/97 and1997/98, respectively. Other major recipients oftotalnon-plan subsidies
include therailways, forwhich subsidies haveremained around 3percentsince 1995/96, andthe
handloom industry, aswellascompensation forexchange loss; support isalsoprovided forpublic
sector enterprises (section (iii)(e)).
149. Inarecent discussion paper entitled "Government Subsidies inIndia", presented toParliament,
theannual levelofimplicit andexplicit subsidies wasestimated tobearound 14.5percentofGDP
in1994/95 figures, including bothCentral andStateGovernment spending. Ofthisamount "merit"
goods orservices, which include elementary education, public health, sewerage andsanitation, social
welfare, soilandwater conservation, scientific research andthePDS, amounted toaround 3.7percent
ofGDPin1994/95 oraround Rs300billion. Theshare ofCentral Government subsidies onnon-merit
goods isaround 35percentofthetotal, including forfertilizers, electricity, diesel andirrigation.India WT/TPR/S/33
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Table III.19
Explicit (non-plan) subsidies
(Rsmillion)
1995/96 1996/97 1997/98a
Major subsidies
Food subsidy 55,000.0 60,660.0 75,000.0
Fertilizer (indigenous andimported) 62,350.0 60,930.0 71,900.0
Concessional sales offertilizers tofarmers 5,000.0 16,740.0 20,000.0
Export promotion andmarket development 3,150.0 4,000.0 4,400.0
Other subsidies
Price support forcopra through NAFED 1,200.0 10.0 10.0
Payments toState Governments inlieuofsales taxonaviation fuelsoldto
international airlines (including AirIndia) 283.3 16.2 0.1
Subsidy foroperations ofcharter flights forHajpilgrims 170.5 373.8 420.0
Subsidy totherailways fordividend relief andother concessions 4,177.3 4,657.1 5,367.2
Insurance schemes forthepoor 160.0 140.0 160.0
Subsidy forcoaltransport byrail-cum-sea route 0.5 0.0 0.0
Maintenance ofbuffer stocks forsugar 150.0 700.0 500.0
Reimbursement toState Trading Corporation forlossonedible oilimports 1,000.0 500.0 500.0
Subsidy toShipping Corporation ofIndia foruneconomic shipping lines 124.0 110.0 110.0
Subsidy toshipyards 356.8 282.6 517.8
-Cochin ShipYard Ltd 104.1 0.0 104.1
-Trawler Development Support Fund 1.0 0.1 0.1
-Hindustan Shipyard Ltd 140.2 33.5 170.0
-Acquisition ofShips -interest differentials 111.5 249.0 243.6
Subidy onmill-made cloth 10.0 0.0 0.0
Handloom subsidy 1,473.3 977.7 840.0
-Special rebate onhandloom cloth 663.8 530.0 400.0
-Subsidy onJanata cloth 770 407.7 400.0
-Others 39.5 40.0 40.0
Compensation forexchange loss 1,425.2 1,499.5 1,539.5
-Industrial Development Bank ofIndia 466.5 451.3 297.3
-Industrial Credit andInvestment Corpn. ofIndia 346.7 479.8 413.2
-National Housing Bank 22.0 28.9 29.0
-Housing Development Finance Corpn. 590.0 539.5 800.0
Write-off loans 0.0 1,836.0 0.0
Subsidy forAssam gasproject 750.0 750.0 750.0
Others 140.0 185.2 150.2
Interest subsidies 341.2 12,572.2 342.3
TOTAL 137,262.1 166,940.3 182,507.1
a Budgeted.
Source: GovernmentofIndia(1996c),Budget1996/97,ExpenditureBudget;andGovernmentofIndia(1997b),Budget1997/98,Expenditure
Budget.WT/TPR/S/33 Trade Policy Review
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(b) Credit policies
150. Priority sector lending targets forIndian banks require that40percentofnetbankcredit lending
isdirected tocertain "priority" sectors. Ofthis40percent, 18percentage points havetobemade
available totheagriculture sector, 10toweaker sections ofsociety87,andtheresttothesmall-scale
sector.88Inaddition tothe40percentlending requirement, theexport lending requirement forIndian
banks is12percentofcredit. Thus thetotalpercentage ofcommercial banklending thatisrequired
tobechannelled intothese activities byIndian-owned banks is52percent. (Therequirement on
foreign-owned banks is32percent,withnostipulation tolendtoagriculture.) Theactual percentage
ofpriority sector lending tonetbankcredit ofpublic sector banks hasimproved from36.56 percent
recorded inMarch 1995, to37.75 percentinMarch 1996and41.72 percentinMarch 1997. Lending
totheagricultural sector hasalsoincreased from13.9percentto16.35 percentduring thesameperiod,
while thesmall-scale sector andweaker sections received 16.63 percentand8.69percentrespectively
asatMarch 1997 (Table AIII.11).89
151. Within thepriority sector, inorder toprotect weaker sections andsmall-scale units, theReserve
Bank ofIndia hassetlending ratesforsmall loans uptoRs200,000. Intherecent financial sector
reforms, banks weregiven freedom tosettheirownratesofinterest onloans overRs200,000. Interest
ratesforsmall loans uptoRs25,000 areprescribed at12percentandto13.5percentforloans between
Rs25,000 andRs200,000.90
152. Other schemes include participation bySIDBI inventure capital funds promoted bypublic and
private sector institutions; participation upto50percentofthetotalvalue ofthefundispossible
withtheprovision thatthefundisdedicated tofinancing small-scale industry. Public sector banks
were required toopen 100specialized small-scale industries bank branches in85targeted areas by
March 1996. AsattheendofMarch 1997, 353specialized branches hadbeenestablished across
thecountry.
153. TheIndustrial Development Bank ofIndia (IDBI) isthemajor financial institution forcredit
totheindustrial sector. Itslending isconcentrated inthetextiles, electricity generation, chemicals
andpharmaceuticals, electrical andelectronic equipment, steelandcement sectors. InOctober 1994,
theIDBIAct,1964wasamended which, interalia,permits theIDBItoissueequity capital topersons
other thantheCentral Government, uptoamaximum amount of49percent. Under theamendment
theIDBI wasallowed tomake itsfirstcapital issue inJuly1995 andpresently ithasnearly
400,000 public shareholders, giving itareconstituted Board andgreater autonomy andflexibility in
itsdecision making.
87Weaker sections were defined as(i)small andmarginal farmers withlandholdings offiveacres andless,
landless labourers, tenant farmers andsharecroppers; (ii)artisans, village andcottage industries where individual
credit requirements donotexceed Rs25,000; (iii)IRDP beneficiaries; (iv)scheduled castes andscheduled tribes;
(v)beneficiaries under theDRIandSUME schemes andthose under thescheme forLiberation andRehabilitation
ofScavengers (SLRS); and(vi)SelfHelpGroups under NABARDs pilotprojects (Reserve Bank ofIndia, 1996).
88Theforfeit fornotmeeting these minimum lending requirements istodeposit theremaining finances with
theNational Bank forRural andAgricultural Development (NABARD), theSmall Industries Development Bank
ofIndia (SIDBI). These deposits arethendistributed asappropriate tothepriority sectors (Chapter IV(6)).
89Government ofIndia (1995b).
90Reserve Bank ofIndia (1996).India WT/TPR/S/33
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154. Selective credit controls, including minimum margins andlevels ofcredit ceilings onbank
advances, areapplied bytheRBIforprice-sensitive essential commodities suchaspulses, coarse cereals,
sugar, cotton, vegetable oilsandoilseeds. AsofOctober 1996, selective credit controls wereremoved
forallthese commodities except buffer stock andunreleased stocks ofsugar heldbysugar mills; the
RBIalsoincluded wheat under selective credit controls from 8April-7 July1997.
(c) Taxconcessions
155. Section 80IA ofIndia'sIncome TaxActgrants taxholidays foraperiod offiveconsecutive
assessment years inanumber ofcases, including industrial undertakings, hotels, ships, thedevelopment
andmaintenanceofanyinfrastructurefacility,researchanddevelopment,andthecommercialproduction
ofmineral oil.Inaddition, taxdeductions ofupto100percentofexport profits aregiven toall
industrial undertakings under Section 80-HHC. Newly established industrial undertakings infree-trade
zones and100percentexport oriented units arealsogranted taxdeductions onincome.91Atax
deduction ofupto50percentofprofits maybeclaimed onincome carried from foreign projects.
156. Excise concessions arealsoprovided toanumber ofsectors. Thesmall-scale sector iseligible
forconcessional excise dutyfromexcise under theCentral Excise DutyExemption Scheme. Juteand
alljuteproducts arealsoexempt fromexcise duties, asaremilking machines anddiary machines, goods
required forsetting upnewprojects withnon-ozone-depleting substances technology. Inorder to
encourage investment inresearch anddevelopment, goods developed andpatented inIndia, andin
anyofthecountries oftheEuropean Union, theUnited States orJapan, areexempt fromexcise duty
forthree years.
(iii) Industrial development policies
157. WiththeemphasisofsuccessiveFiveYearPlansonrapidindustrialization,industrialdevelopment
policies inIndiahaveexerted tightcontrols onthekinds ofindustries thatcould besetupandtheprice,
supply anddistribution ofthese industrial goods. However, aspartofthegeneral liberalization
programme, many ofthese controls havebeenrelaxed orremoved.
(a) Industrial licensing
158. Since India'slastReview in1993, industrial licensing controls havebeenreduced. Compulsory
industrial licensing isnowrequired fornineproduct categories, including thedistillation ofalcoholic
drinks, sugar, tobacco, plywood andother wood-based products, andconsumer electronics, compared
with18inMarch 1993 (Table III.20).92These sectors willcontinue tobesubject tocompulsory
industrial licensing for"reasons related tosecurity andstrategic concerns, social reasons, problems
related tosafety andover-riding environmental issues andthemanufacture ofproducts ofhazardous
nature".93Forproducts onthislist,applications have tobemade totheSecretariat ofIndustrial
Approvals (SIA) forindustrial licences.94Licensed capacity forthese nineindustries canonlybe
91Income inthiscasedoes notinclude profits.
92Anumber ofproducts within individual categories havealsobeenremoved from thelist,reducing thetotal
number ofproducts subject toindustrial licensing.
93Government ofIndia (1996d); andGovernment ofIndia (1991).
94Government ofIndia (1996l).WT/TPR/S/33 Trade Policy Review
Page 96
increased uponobtaining Government permission. Allapplications forindustrial licences orexpansion
oflicensedcapacityareconsideredbystatutorilyconstitutedcommitteeswhomaketheirrecommendations
totheGovernment.
Table III.20
Industries subject tocompulsory industrial licensing inIndia, December 1997
Industry HSClassification
Distillation andbrewing ofalcoholic drinks 22.03, 22.04, 22.05, 22.06, 22.08
Sugar 170199.02, 170199.09
Coalandlignite 27.01, 27.02
Cigars andcigarettes oftobacco andmanufactured tobacco
substitutes24.02
Petroleum (other thancrude) anditsdistillation products 27.10, 27.11, 27.12, 27.13
Industrial explosives, including detonating fuses, safety fuses,
gunpowder, nitrocellulose andmatches36.01 to36.06
Hazardous chemicals 22.07, 280110.00, 281119.01, 281210.01, 2815.11, 2815.12,
290121.00, 290122.00, 290124.01, 290220.0, 290230.00,
290241.00, 290242.00, 290243.00, 290244.00, 290531.00,
29.05, 292229.02, 292910.09, 380810.02, 380810.16,
380810.21, 380810.29 and390110.00
Drugs andpharmaceuticals (according toDrugs Policy) 29.36 to29.39, 29.41 to29.42, 30.01 to30.06
Electronics aerospace anddefence equipment 87.10, 88.01 to88.05, 8906.01, 93.01 to93.07
Source: Government ofIndia.
159. Similarly, amendments havebeenmade tothenumber ofindustries reserved forpublic sector
companies; theirnumber hasbeenreduced tosix(with theremoval ofminerals notspecified inthe
Schedule totheAtomic Energy (Controls ofProduction andUse)Order, 1953) (Chapter II(6)(i)).
Inaddition tothis,836items were reserved forproduction onlybyenterprises thatareclassified as
small scale(Table III.21). The1997/98 Budget hasreduced thisnumber to821,removing ricemilling,
lentilmilling,poultryfeedexceptinpelletform,vinegar,syntheticsyrups,biscuits,ice-cream,corrugated
paper andboards, hairdriers, automobile hubcaps, automobile ornamental fittings, automobile spot
lamps assembly excluding combination lamps, automobile stoplamps assembly, automobile taillamp
assembly andcarashtrays.India WT/TPR/S/33
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Table III.21
Items reserved forthesmall-scale sector
Product Number ofitems
Food andallied industries 12
Textile products including hosiery 22
Wood andwood products 14
Paper products 30
Leather andleather products including footwear 18
Rubber products 37
Plastic products 51
Chemicals andchemical products; laboratory chemicals andreagents 182
Glass andceramics 27
Electrical machines, appliances andapparatus including electronics 56
Mechanical engineering excluding transport equipment 201
Transport equipment; boats andtruck body parts andothers 54
Bicycle parts, tricycles andperambulators 42
Mathematical andsurvey instruments, sports goods, stationery items, clocks andwatches 75
Total 821
Source: Government ofIndia.
(b) Price anddistribution controls
160. AspartoftheEssential Commodities Act,1955, theGovernment applies price controls toa
numberofessentialitems,includingagriculturalproducts,pharmaceuticalsandsomepetroleumproducts.
In1995, theActcovered 44items many ofwhich arepartoftheGovernment 'sPublic Distribution
System (PDS). Foranumber ofproducts, including themostimportant staple crops, theGovernment
setsminimum support prices (MSPs) atthebeginning ofeachseason tosupport farmers. Farmers
arenotobliged tosellatthisrecommended price butmillers arerequired tosellacertain percentage
oftheiroutput togovernment procurement agencies. Acentral issue price (CIP) foressential foods
isalsosetbytheGovernment andisapplied tothePDS; ithasbeenuniform forallStates since
February 1994(Chapter IV(2)(ii)). Products inother sectors, including petroleum andpharmaceutical
products, arealsosubject toprice controls. Reforms in1997reduced thenumber ofproducts subject
toprice controls from 44to31.95
161. Minimum export prices (MEPs) were widely usedbefore the1991 reforms. Most ofthese
wereapplicable toagricultural products, forwhich localprices wereartificially depressed because of
governmentpricesupportprogrammes.ThepresentpolicymayfixMEPsforwheatandwheatproducts,
coarse grains andstone boulders; atpresent MEPs onlyapply fortheexport ofstone boulders to
Bangladesh.
95Theitemspresentlycoveredbypricecontrolsarecattlefodder,coal,automobilecomponentsandaccessories,
cotton andwoollen textiles, drugs, foodstuffs including edible oilseeds andoils, ironandsteel including
manufacturedproducts,paper,includingnewsprintpaperboardandstrawboard,petroleumandpetroleumproducts,
rawcotton andcotton seeds, rawjute,jutetextiles, fertilizers, cement, textile machinery, textiles made from
silk,yarn, household appliances, exercise books, corifibre, insecticides andfungicides, tea,seeds offoodand
horticultural crops, switches, plugs andsocket outlets.WT/TPR/S/33 Trade Policy Review
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162. Distribution controls especially forriceduring theharvest seasons arestillmaintained
(Chapter IV(2)(ii)(a)).
(c) Exitbarriers
163. India'sregulationsontheclosureofindustrialunitsarecomplexandrelativelyinflexible,making
industrial restructuring ofsickandweak industrial units difficult (section (i)above).96
164. Inorder tofacilitate theclosure offirms considered tobeuneconomic, theGovernment
established asafety-net mechanism fordisplaced workers. TheNational Renewal Fund (NRF),
established in1992, consists oftheNational Renewal Grant Fund (NRGF), which finances voluntary
retirementschemesforworkersinpublicenterprises,re-training,redeploymentcounsellingandplacement
services fordisplaced employees; andtheEmployment Generation Fund (EGF) foremployment
regenerationschemesinorganizedandunorganizedsectors.Bothschemesareexpectedtobeoperational
foramaximum period oftenyears. TheNRFutilized approximately Rs2.5billion in1994/95. The
estimated number ofworkers thathadusedtheNRGF byend-October 1997totakevoluntary retirement
was106,214.
(d) Reforming public sector enterprises (PEs)
165. DespitetheintentionsoftheBoardforIndustrialandFinancialRestructuring(BIFR)(section(i)),
significant problems anddelays havebeenencountered inrestructuring thepublic sector enterprises.
Inorder toencourage corporate reorganization inthePEs,theGovernment hasrecently given financial
andmanagerialautonomytonine"navratna"enterprises.Accordingtotheauthorities,moreover,greater
autonomy hasbeengiven toallPEsformaking decisions oninvestment.
166. Public sector enterprises wereestablished, according totheauthorities, tofulfil anumber of
objectives, including theredistribution ofincome andwealth, thecreation ofemployment opportunities
andthepromotion ofbalanced regional development, inaddition totheoverall goalofrapid economic
andinfrastructural growth. Atend-March 1996, thepublic-enterprise sector consisted ofaround
243central public enterprises97andaround 800state-level public enterprises.98Ithasbeenestimated
thatalthough public sector enterprises account fortwothirds ofIndia'sproductive industrial capital,
theirshare innetvalue added isonlyonethird.99Anumber ofreasons wereidentified forthepoor
performance ofthese enterprises, including costandtimeoverruns, inappropriate investment and
locational decisions, uneconomic pricing andtariffrates, andaninadequate allocation ofresources.100
167. Theprogramme onreforming public sector enterprises emphasized fiveareas:
96Brahmbhatt, Srinivasan andMurrell (1996).
97Government figures exclude sixinsurance andtwofinancial companies thathave Central Government
investment butwhich have nodirect management responsibilities.
98Gouri (1996). These onlyinclude non-departmental public sector enterprises, i.e.,those enterprises that
have been established under theCompanies Actandarelegally separated from theGovernment, maintaining
their ownfinancial accounts.
99Gouri (1996).
100Government ofIndia (1993).India WT/TPR/S/33
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- de-reservation, de-licensing andliberalization oftrade toensure thatpublic sector
enterprises aresubject tocompetition;
- theamendment oftheSickIndustrial Companies ActtoreferallPEstotheBIFR;
- thecreation oftheNRF in1992 toprovide, inter alia,asafety-net forworkers
unemployed during theprocess ofrestructuring PEs;
- reduced budgetary support, suchasloans toPEs; and
- disinvestment ofupto49percentofselected profit-making PEs.
TheGovernment indicates tentative disinvestment targets eachyearinitsbudget, andhasthusfarraised
Rs100billion from disinvestment. Therecommended 49percentdisinvestment hastaken place in
onePE,namely Hindustan Petroleum Corporation; inmost other PEsgovernment holdings range
from 60to90percent.101According totheauthorities, however, because ofmarket conditions
disinvestment upto49percentisnotexpected tobereached inonestep. Insome cases, including
theMahanager Telephone Nigam Limited (MTNL), Videsh Sanchar Nigam Limited (VSNL), Bharat
Heary Electricals Limited (BHEL), Bharat Petroleum Corporation Limited (BPCL) andHindustan
Petroleum Corporation Limited (HPCL), theGovernment hascurrently disinvested upto30percent
ofitsequity.
168. Toprovide more systematic disinvestment procedures aDisinvestment Commission was
constituted inAugust 1996, tomake decisions inatransparent manner. Since itsformation, 40PEs
havebeenreferred totheCommission andinitsfirstreport theCommission hasmade disinvestment
recommendations forthree ofthese 40PEs,including theGasAuthority ofIndia Limited (GAIL),
MTNL, andtheContainer Corporation ofIndia(CONCOR). Inthe1997/98 Budget, theGovernment
announced atarget ofRs70billion from disinvestment infourcompanies, namely GAIL, MTNL,
CONCOR andtheIndian OilCorporation (IOC). Following disinvestment, itisexpected thatthe
Government 'sshare willdecline to52.6percent(from 65.73 percent)inMTNL, 71.63 percent(from
96.3percent)inGAIL, 66percent(from 77percent)inCONCOR and86percent(from 91percent)
inIOC.
169. Forthose companies recommended forrestructuring, aprogramme ofMemoranda of
Understanding (MOUs) wasintroduced. MOUs arecontracts, usually lasting oneyear, thatchart the
expected performance ofthefirm.102Theevaluation of95companies 'performance in1994/95 bythe
Department ofPublic Enterprises showed that39wereconsidered tohavebeenexcellent performers,
26wereverygood, andonlytwocompanies wereratedaspoor.103Ofthe95,16arestillbeing evaluated
ofafurther 104PEsthatsigned MOUs in1995/96, twowereratedaspoor. In1996/97, outof110PEs
evaluated, 46werejudged excellent performers, 27verygood, 19goodand11fair.Seven companies
were rated aspoorperformers.104
(e) Budgetary support topublic enterprises
170. Aspartofitsfiscal reform, theGovernment pledged areduction inbudgetary support forpublic
enterprises (Table III.22). There wasinitially adecline inbudgetary support from 0.7percentof
101Government ofIndia (1997c).
102This includes financial parameters including profits andthenetprofit tocapital ratio.
103Atotalof99companiessignedMOUsalthoughonly95companiessubmittedinformationtotheDepartment.
104Therankings arebased onevaluations carried outbyanAd-hoc Task Force (ATF); companies thathave
performed better thantheir targets areclassified asexcellent, while companies thathave mettheir targets are
classified asvery good.WT/TPR/S/33 Trade Policy Review
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GDP in1990/91 toaround 0.4percentin1994/95, butthisincreased toaround 0.7percentofGDP
in1996/97, partly duetopayments tomeettherestructuring requirements ofPEs.
Table III.22
Budgetary support topublic sector enterprises inIndia, 1996/97 and1997/98
(Rsmillion)
Ministry1996/97
Equity Loans1997/98a
Equity Loans
Agriculture 0.9 2,983.9 0.1 2,286.0
Chemicals andFertilisers 749.1 7,178.3 1,168.5 5,909.9
-Chemicals andpetrochemicals 131.0 459.0 293.5 326.5
-Fertilizers 425.0 6,719.3 875.0 5,583.4
Civil Aviation 116.3 83.7 207.4 150.0
Coal 0.0 2,293.2 0.0 3,148.5
Commerce 250.0 0.0 750.0 0.0
Defence ... ... ... ...
Finance 8,005.0 2,482.6 3,708.6 1,478.5
Food 178.6 0.0 200.0 0.0
Food Processing 15.0 5.0 15.0 0.0
Health andFamily Welfare 16.6 6.0 7.6 7.5
Industry 1,140.0 4,786.2 1,300.0 3,772.8
-Heavy Industry 760.0 2,413.8 780.2 1,411.2
-Small-scale Industries andAgro andRural Industries 380.0 2,372.4 519.8 2,361.6
Information andBroadcasting 1.0 1.0 0.0 0.0
Mines 41.3 270.0 110.0 295.0
Non-conventional energy sources 280.0 872.4 345.0 801.3
Petroleum andNatural Gas 0.0 1,000.0 0.0 0.0
Planning andProgramme Implementation 16.5 8.7 1.0 0.0
Power 5,717.2 14,961.0 9,742.5 13,459.2
Railways 14,390.0 0.0 18,310.0 0.0
Science andtechnology 62.5 47.5 80.6 27.5
Steel 11.3 170.7 85.0 172.0
Surface Transport 2,174.1 1,938.9 5,211.5 3,446.2
Telecommunications 0.0 0.0 0.0 30.0
Textiles 13.0 4,692.5 33.7 2,944.0
Tourism 0.0 0.0 0.0 0.0
Urban Affairs andEmployment 260.0 300.0 460.0 690.0
Water Resources 0.0 50.0 0.0 50.0
Welfare 1,765.1 4.1 2,700.1 4.1
Department ofAtomic Energy 3,469.6 10.0 3,600.3 100.0
Department ofElectronics 120.0 1.0 260.0 5.0
TOTAL 38,783.1 56,111.2 50,765.4 48,460.2
... Notavailable.
a Budgeted.
Source: Government ofIndia(1997b), Budget 1997/98, Expenditure Budget 1997/98, Vol.1,Statement 9and14,pp.22-23 andpp.51-56.
171. Amajor form ofplanandnon-plan support isthrough loans tothePEs. In1996/97, total
non-plan andplanloans tothePEsamounted toaround 2.2percentoftotalbudgetary expenditure,
falling slightly to1.7percentunder the1997/98 Budget. According totheauthorities, these loans
areinparttomeettherestructuring requirements forPEsasrecommended bytheBIFR andthat,in
fact,theloans aremade atratesofinterest thatarehigher thancommercial rates.India WT/TPR/S/33
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172. There hasbeenanincrease inthetotalamount loaned toPEsbytheMinistry ofChemicals
andFertilizers, especially theDepartment ofFertilizers, although loans totheDepartment ofFertilizers
isexpected todecline toRs5.58billion in1997/98 from Rs6.7billion intheprevious year. The
other large group ofrecipients consists ofPEssupported bytheMinistry ofIndustry, especially the
small-scale andagro-and rural-industries. Thelargest recipient isthepower sector, receiving almost
Rs15billion inloans under the1996/97 Budget andanexpected Rs13.5billion in1997/98. Additional
loans arealsoprovided fortheKhadi andVillage Industries Commission (KVIC) andtotheHousing
andUrban Development Corporation (Hudco), fortherenewal ofpastloans andforloans from the
Central Government Employees Group Insurance Scheme Fund, respectively.
173. Additional budgetary support isprovided intheformofinterest subsidies andgovernment loan
guarantees toPEs. Interest ratesubsidies amounted toRs341.2 million in1995/96. In1996/97, they
rosetoRs12.5billion, nearly three times thebudgeted level, mainly because ofincreased support
forheavy industry public enterprises (Table AIII.12). According totheauthorities thiswasanunusual
payment made mainly tohelpPEsrestructure asrecommended bytheBIFR. Budgeted interest subsidies
for1997/98 areconsiderably lower, atRs342million.
(iv) Assistance forresearch anddevelopment
174. Central Government funding forresearch anddevelopment ismainly channelled through various
government departments suchastheDepartment ofScience andTechnology (DST), Department of
Biotechnology, Ocean Development, Department ofScientific andIndustrial Research, Department
ofAgricultural Research andEducation, Ministry ofHealth andothers. Industrial research ismainly
funded bytheCouncil forScientific andIndustrial Research (CSIR), which hasanetwork of
40laboratories and81fieldstations across India andhadabudget ofRs4,440 million in1996/97.
Agricultural research ismainly funded bytheDepartment ofAgricultural Research andEducation,
which administers theIndian Council ofAgricultural Research (ICAR). Budgetary support forICAR
in1996/97 wasRs5.6billion.
175. The1996/97 Budget provided Rs300million fortheFund forTechnology Development and
Application, which wascreated inSeptember 1996tohelpdevelop indigenous technologies andadapt
imported technologies. The1997/98 Budget provided atotalofRs700million fortheFund.
(v) Competition lawsandregulations
176. TheMonopoliesandRestrictiveTradePractices(MRTP)Act,1969establishedalegalframework
torestrict monopolistic tendencies andencourage competition intheeconomy. Itsoriginal focus was
theprevention ofeconomic concentration asdescribed inClauses (b)and(c)ofArticle 39oftheIndian
Constitution.105Thelatest amendment totheMRTP Actin1991 eliminates theneedtoseekprior
government approval bylargecompanies forestablishing orexpanding existing units. Theprovisions
105Article 39(b)and(c)oftheConstitution callsforthedistribution oftheownership andcontrol ofmaterial
resources soasbesttoserve thecommon good andtoensure thattheresult oftheeconomic system isnotthe
concentration ofwealth andmeans ofproduction tothecommon detriment.WT/TPR/S/33 Trade Policy Review
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dealing withtheconcentration ofpower106,suchasmergers andtakeovers, havebeenrepealed and
thepresent emphasis inthelawisoncontrolling monopolistic, restrictive andunfair tradepractices.107
177. TheMonopolies andRestrictive Trade Practices Commission, aquasi-judicial body was
established in1970under theMRTP Act.TheActauthorizes theCommission toenquire intorestrictive
ormonopolistic trade practices referred toit.Cases canbebrought bytheCentral Government, or
bytheOffice oftheDirector General (Investigation andRegistration), which assists theCommission
initsdaily functioning; theCommission mayalsoinitiate cases. IftheCommission finds evidence
ofrestrictive orunfair trade practices itcanpass"cease anddesist" orders. Theoffending company
anditsdefaultingofficers,iffoundguilty,canbepenalizedthroughimprisonmentforaperiodofbetween
sixmonths andthreeyears orfined uptoRs5,000 foreachdaythattheycontravened anorder passed
bytheCommission. TheCommission canalsoissueinjunctions andcompensation orders. Thenumber
ofcases examined bytheCommission since itsinception in1970include 10,139 applications relating
tomonopolistic, restrictive andunfair trade practices, 14,562 applications forcompensation and
2,222 applications forinjunctions.
178. Inorder tointroduce transparency incorporate takeovers, theSecurities andExchange Board
ofIndia notified theSEBI (Substantial Acquisition andTakeovers) Regulations inFebruary 1997.
Among other matters, theregulations aimtoprotect therights ofshareholders through disclosure
requirements, amore exact definition of"control", andbyensuring thatanypurchases ofshares made
bypersons inexcess of10percentofthepaidupcapital ofacompany should bemade through a
public tender offer.
(vi) Trade-related investment measures (TRIMs)
179. Indiaallows foreign direct investment tovarying levels offoreign equity participation, ranging
from24to100percent,depending onwhether thesector isgiven priority (Chapter II(6)(i)). Allsectors
oftheeconomy except those relating tosecurity concerns suchasdefence, railways andatomic energy
andalsotheinsurance sector, arenowopentoforeign investment. Foreign investment inthesmall-scale
sector isrestricted toa24percentforeign equity participation.
180. Ingeneral,sinceIndia'slastReview,local-contentrequirementssuchasthephasedmanufacturing
programme (PMP) havebeendiscontinued. However, anewrequirement isthatinvestors inthe
automobile sector signMOUs withtheDGFT; ithasbeenclaimed thatoneoftherequirements of
suchMOUsistoincreaseindigenizationofproduction(section(2)(xv)).108Anothermeasurethatcontinues
tobeapplied istherequirement ofdividend balancing forforeign companies in22sectors
(Chapter II(4)(i)).
106Monopolies andRestrictive Trade Practices Act,1969; Chapter III,partAoftheActwasrepealed by
the1991 amendment. Chapter III-A oftheoriginal Actdealing withrestrictions ontheacquisition andtransfer
ofshares bycorporate bodies wasalsoeliminated bythe1991 amendment.
107Inthisrespect, monopolistic trade practices aretaken tomean anypractices thatdistort prices, supply
ordistributionofgoodsandservices,limittechnicaldevelopmentorcapitalinvestment,causequalitytodeteriorate,
orresult inunreasonable increases intheprofits ofafirm; restrictive trade practices aredefined aspractices
thathave ormayhave theeffect ofpreventing, distorting orrestricting competition inanymanner.
108USTrade Representative (1997).India WT/TPR/S/33
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(vii) Trade-related intellectual property rights (TRIPS)
(a) Overview
181. India isamember oftheBerne Convention fortheProtection ofLiterary andArtistic Works
(since 1928), theUniversal Copyright Convention, including the1971 revision (since 1957) andthe
Geneva Convention forproducers ofphonograms. Itratified theWashington Treaty onIntegrated
Circuits in1989. India hasnotsigned theParis Convention. Since theentry intoforce oftheWTO
Agreement, India hasamended theCopyright Act,1957 tomeet therequirements oftheTRIPS
Agreement except forperformers 'rights: action toamend thePatents Act,1970 andtheTrade and
Merchandise Marks Act,1958isunder way,andlegislation ongeographical indications, plantvariety
protection andintegrated circuits isindrafting.
(b) Administrative Procedures
182. India'spatent lawisdefined bytheIndian Patent Actof1970, which grants andrecognizes
product andprocess patents foraperiod of14years from thedateofapplication. Anexception is
providedforfood,chemicalsandpharmaceuticals,wherethetermofprotectionisreducedtosevenyears
from thedateoffiling andonlyprocess patents arerecognized andgranted. Anautomatic licence
ofrightisalsopresent intheAct,which isprovided afterthree years from thegranting ofapatent
inthefood, chemicals andpharmaceuticals sectors.109
183. AspartoftheTRIPS Agreement India isrequired toincrease thetermofpatent protection
to20years fromthedateoffiling inallcategories andisexpected toprovide bothproduct andprocess
patents.110Duetoitsdeveloping-country status, India hasfiveyears fromtheentry intoeffect ofthe
Agreement toimplement these changes. Inthecaseofpharmaceuticals andagricultural chemical
technologies India hasamaximum period oftenyears inwhich toimplement theAgreement.
184. Although India hasuntiltheyear2000 toamend itspatent lawstocomply withtheTRIPS
Agreement, itisrequired toprovide ameans forreceiving product patent applications intheareas
ofpharmaceuticalsandagriculturalchemicalproducts,andonfulfilmentofcertainconditions,toprovide
forexclusive marketing rights forpharmaceuticals andagricultural chemical products.111Indianotified
anordinance on31December 1994toamend thePatents Act,1970; theBilltoreplace theordinance
wasnotpassed because thelegislative process could notbecompleted during Parliamentary time.
According totheauthorities, ameans isnevertheless inplace forthePatent Office toreceive patent
applications forpharmaceuticals andagricultural chemical products. Adecision byapanel established
under theWTO 'sdispute settlement mechanism inSeptember 1997, however, stated thatIndia was
109Forallother patents applications forsuchalicence ofright must bemade totheController General of
Patents whoconsiders each application onitsownmerits (Section XVIoftheIndian Patents Act,1970).
110Some sectors, notably diagnostic, therapeutic andsurgical methods forthetreatment ofhumans oranimals,
plants andanimals other thanmicro-organisms andessentially biological processes fortheproduction ofplants
oranimals other than non-biological andmicrobiological processes, areexcluded from patentability
(Article 27(aandb)oftheTRIPS Agreement). Countries must however provide either patent orsuigeneris
protection oracombination ofthetwofornewvarieties ofplants (Article 27(B)).
111Article 70,paragraphs 8and9oftheTRIPS Agreement.WT/TPR/S/33 Trade Policy Review
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inviolation ofitsobligations under Article 70.8and70.9oftheTRIPS Agreement.112Thedecision
with respect tothese twoarticles wasupheld bytheAppellate Body inDecember 1997
(Chapter II(5)(vi)).113
185. India'slawoncopyrights islaiddown intheIndian Copyright Actof1957, asmostrecently
amended in1994. Copyright isprovided toall"original literary, dramatic, musical andartistic works,
cinematographic filmsandsound recordings".114Themostrecent changes bring sectors suchassatellite
broadcasting, computer software anddigital technology under Indian copyright protection.
186. Section 14oftheAct,asamended, provides copyright protection forthelifetime oftheauthor
andanadditional 60years, while photographs, films, andsound recordings areprovided copyright
protection foraperiod of60years. Inthecaseofanonymous orsynonymous works, protection is
provided foraperiod of60years fromthedateofpublication.115Tocomply withitsobligations under
theTRIPS Agreement, India isrequired toextend aterm ofprotection ofatleast 50years to
performers.116Indiaintends tomake useofthefive-year transitional period granted toitasadeveloping
country signatory tomake thisamendment.
187. TheCopyrightActalsoestablishesaCopyrightOffice,whichisunderthecontroloftheRegistrar
ofCopyrights, whointurnisappointed bytheCentral Government. ACopyright Board hasalsobeen
established, which discusses questions ofownership, royalty, compulsory licensing andresale of
intellectual property rights. TheRegistrar ofCopyrights istheSecretary oftheCopyright Board.
188. Thepresent Indian Trade andMerchandise Marks Act,1958governs theuse,registration and
protection oftrade marks. Trade marks arepresently registered forseven years andcanberenewed
forfurther periods ofseven years. They aregranted forproducts thataredistinctive. Inorder tobe
considered forregistration, themark should notcause confusion, should notcomprise scandalous or
obscene materials andshould notcause anyreligious offence. Service marks andtrade secrets are
protected under Indian common law.
189. Although India'slegislation ontrade marks neednotbeamended tobring itintoconformity
withtheTRIPS Agreement untiltheyear2000, anewtrademark billwasintroduced inParliament
in1993. Thebillcould notbepassed because theLower House wasdissolved before thelegislative
process could becompleted.
190. AprojecttomodernizetheregistrationoftrademarkswaslaunchedandcompletedinMay1996.
Theresults oftheproject include anexpanded capacity forregistering trade marks bystreamlining
theapplication procedure andstrengthening theheadandbranch offices fortrademarks inIndia. Further
112WTO document DS50/5, 5February 1997.
113WTO document DS50/AB/R, 19December 1997.
114ThePrevention ofFood Adulteration Act,1954, Chapter III.
115Indian Copyright Act,1957, Sections 22-29.
116Performers areatpresent excluded from theCopyright Act.India WT/TPR/S/33
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efforts tocomputerize theprocess andproviding on-line linkages withinternational patent anddesign
databases areunder consideration.117
191. Industrial designs aregoverned bytheDesigns Actof1911, which provides protection toa
design registered under theActforaperiod offiveyears, withrenewals fortwofurther five-year periods
eachbeing possible, foratotaloffifteen years. Tobeeligible forprotection, thedesign mustbeoriginal
andnovel. Aswithtrade marks, India hasuntiltheyear2000 tomake theappropriate changes to
bring theActintoconformity withtheTRIPS Agreement.
192. Innewareas suchasgeographical indicators, layout designs ofintegrated circuits andthe
protection ofundisclosed information, Indiaprovides nospecific protection, although theIndian Courts
have provided rulings ofwrongful disclosure under common lawinthepast. India hasuntil
1January 2000 tobring itslegislation inthese areas intoconformity withtheTRIPS Agreement.
(c) Enforcement ofintellectual property rights
193. Theinfringement ofapatent canbechallenged byanyperson inadomestic court oflawunder
Section 104oftheIndian Patent Act.TheCourt hasthepower togrant aninjunction against the
infringing party andalsotodemand either damages oranaccount ofprofits. Failure tocomply with
these fines ispunishable byimprisonment foraperiod ofuptotwoyears.118These penalties are
applicable inthecaseofviolation oftheprovisions ofSections 35and39oftheAct.
194. Theinvestigation andenforcement ofcopyright violations istheresponsibility oftheStates.
Thecopyright lawprovides forbothcivilandcriminal prosecutions, withapenalty ofsixmonths to
three years imprisonment andafineofbetween Rs50,000 andRs200,000.119Inaneffort toimprove
enforcement,theMinistryofHumanResourcesDevelopmentwhichadministers,theAct,hasencouraged
StateGovernments toestablish special enforcement cells. Suchcellsarealready functional in23States
andUnion Territories andareresponsible foridentifying copyright infringements andprosecuting such
violations. IftheState doesnotactappropriately insuchacase, theCentral Government cantake
action. Thepolice havepowers to"seize without warrant", allcopies ormeans usedforinfringing
thework ifthere issufficient reason tobelieve thataninfringement ofcopyright istaking place.120
India hasaninterest inandisactively pursuing theenforcement ofcopyright lawbecause ofthe
importance ofitsownproduction ofcopyright material inthefilm,phonograph andcomputer software
sectors.
(d) Parallel Imports andcompulsory licensing
195. Indiadoesnotprohibit parallel imports ofgoods andservices containing anyformofintellectual
property rights. Imports areallowed onanm.f.n. basis withnopreferential treatment given toany
national. Anyofthese imports however, iftheyinfringe theintellectual property rights ofothers,
maybechallenged inanIndian Court ofLaw.
117Government ofIndia (1997c).
118TheIndian Patents Act,1970, Section 118.
119Indian Copyright Act,1957, Art.63.
120Indian Copyright Act,1957, Article 64(1).WT/TPR/S/33 Trade Policy Review
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196. Chapters 16and17oftheIndian Patents Act,1970contain provisions relating tocompulsory
licensing ofpatents. Provisions aremade forthegranting ofcompulsory licences bytheController
General ofPatents ondetermination thatthe"reasonable requirements" ofthepublic havenotbeen
satisfied orthattheprice being charged isnot"reasonable".121TheGovernment isentitled tomake
anapplication totheController fora"licence ofright" atanytimeaftertheendofthree years from
thegranting ofapatent ifitisfeltthatthese "reasonable" requirements havenotbeenmet. Thepatent
mayalsoeventually berevoked bytheController aftertheendoftwoyears following thegranting
ofacompulsory licence ifitisfeltthatthepublic isnotbeing served. Inpractice however, compulsory
licences arerarely everinvoked; during thelastfiveyears noapplications forcompulsory licences
havebeenfiled.
197. Under copyright law,compulsory licences aregranted inacasewhere anauthor refuses to
allow therepublication ofthework orhasrefused communication ofthework tothepublic through
other forms, suchasbybroadcast. Inthiscase, theCopyright Board may, afterholding anenquiry
andgiving theowner reasonable opportunity tobeheard, grant acompulsory licence enabling thework
toberepublished. Compulsory licences canalsobegranted iftheauthor isunknown, hasdiedor
cannot betraced. Inthiscase, theapplicant mustpublish theproposal inanewspaper withabroad
circulation inIndiabefore theBoard cangrant acompulsory licence forpublication.122Nocompulsory
licences havebeenissued under these provisions.
121Thetermreasonable requirements inthiscaseincludes instances, forexample, where thedemand forthe
patented article isnotbeing mettoanadequate extent oronreasonable terms, orthefailure ofthepatentee to
manufacture thepatented article toanadequate extent (The Indian Patents Act,1970, Section 90).
122Indian Copyright Act,1957, Art.31.