US snubbed for fabricating 'hidden subsidies' issue

NEW DELHI: The government has rebuffed US' attempts to bring the Indian subsidy programme under the scrutiny of the World Trade Organisation, saying the "undisclosed subsidies" identified by Washington had either expired or were not subsidies at all.

US trade representative Ron Kirk had in October accused India of hiding about 50 central and state government subsidy programmes from the world trade body in violation of WTO's free trade rules. Terming the situation "intolerable", Kirk had said that India filed its first notification in almost 10 years and, even then, notified "only three of the many subsidy programmes we know to exist." Kirk's office had also identified nearly 200 subsidy schemes in China that it said have not been notified.

"Just because the US thinks it is a subsidy does not make it a subsidy," commerce secretary Rahul Khullar told ET. "The US has picked up schemes, such as the Duty Entitlement Pass Book, where benefits have already expired. And there are other programmes, such as advance licences and related schemes, where the exporters are being reimbursed input taxes."

At a recent meeting of the committee on subsidies and countervailing measures, the US had demanded that India should notify these schemes, besides phasing out subsidies on textiles and apparel. Countervailing duties are levies imposed on imports to counter the effects of subsidies given by an exporting country to its industry.

Khullar, however, said India had no obligation to notify these schemes. "The US understanding of the matter is very poor," he said, adding that India planned to do nothing about the allegations as the US had not officially moved the WTO on the issue.

Notifying export schemes as subsidies at WTO will give other countries an opportunity to target India and levy countervailing duties on Indian merchandise, said Ajay Sahai, director general & CEO of Federation of Indian Export Organisations.

Most of the schemes identified by the US as subsidies are compatible with WTO rules, Sahai said, adding that an exporter in India ends up paying more taxes than what is reimbursed to him as the Centre does not compensate for state levies such as octroi, electricity cess and sales tax.