Owing to the tremendous pressure exerted by the exporting community in the country, the Union commerce ministry has extended the DEPB (duty entitled passbook) scheme till December 31, 2009. Moreover, the ministry has withdrawn, with retrospective effect, its last year's decision to reduce the DEPB rates by 2 per cent.

The commerce ministry last year had withdrawn the hike in DEPB rates by 2 per cent given to exporters to partly compensate for the losses incurred due to sharp rupee appreciation against US dollar during the year 2007. The reason for withdrawal of hike in DEPB rates by the ministry was the almost 10 per cent depreciation of the rupee since April 2008.

The extension of DEPB scheme and the reinstatement of the rate will prove to be a big relief to the beleaguered pharma exporters. Obviously, the pharma exporters have termed the commerce ministry decision as 'a big relief at this time of economic crisis'.

The DEPB scheme was first announced by the central government on April 1, 1997 under EXIM Policy 1997-2002. It is an export promotion scheme and envisages grant of DEPB credit entitlement to an exporter at the time of export at an ad-valorem rate notified by DGFT (Director General of Foreign Trade), in relation to FOB value of the export product.

These rates are based on the computation of basic customs duty suffered by the exporters on the inputs listed in the standard input-output norms (SION) applicable to the export product. The crucial feature of the DEPB scheme is that all the inputs listed in the SION are deemed to have been imported and to have suffered customs duties. DEPB rates are finalised by the DEPB committee, chaired by additional DGFT and consists of representative from Ministry of Finance also. Value caps have been imposed on export products having DEPB rates of 15 per cent or more to curb the tendency of unscrupulous exporters to avail most of the runaway benefits by over-invoicing export.

Ever since the DEPB rate was reduced by the government, the exporters have been demanding its withdrawal to make the Indian industry more competitive in the world trade platform. In fact, the Pharmaceutical Export Promotional Council (Pharmexcil)'s immediate past chairman DB Mody has even sought Prime Minister Dr Manmohan Singh's intervention on the issue.