The pharmaceutical exporters in the country have urged the Centre to restore the scheme for exemption from special additional duty (SAD) on imports made under the DEPB scheme. The scheme was withdrawn after the close of the last financial year.

The exporters, who represented through the Indian Drug Manufacturers Association (IDMA), have sought the Union Finance Minister that unless the government take necessary action immediately in this regard, the objective of the country attaining a level of exports equivalent to one per cent of global trade in shortest possible time would remain only a slogan.

The IDMA in its letter has noted that though the Duty Entitlement Scheme under the Exim Policy has been the most successful and widely used instrument of promotion of exports, the levy of SAD on imports through DEPB is falling heavily on the exporters and has severely affected the competitiveness of Indian exports.

Although the imports under the DEPB scheme were exempt from the levy of Special Additional Duty till 31.3.02, the exemption is subject to the element of SAD being debited from the DEPB licences since April 1, 2002. As a result, the premium on sale of DEPB licences, which was being generated by the SAD exemption factor, has declined form 110 per cent or more to about 95 percent, the IDMA points out.

"In addition, during the recent few weeks the Indian Rupee has appreciated against the US dollar to the extent of 1.51 per cent (from Rs. 49.08 /$ to Rs. 48.35/$). If the exporters are also required to continue to bear the burden of 4 per cent SAD (which effectively works out to 6.04 %), there is a cascading effect of 22 per cent. This will have adverse impact on our exports as our competitive strength stands sapped in equal measure," says D B Mody, chairman, International Trade Sub-Committee, IDMA.

Mody added that DEPB scheme actually provides a hassle-free method of making available duty free inputs required for export production without which our exports cannot withstand competition at the international level. And, in the absence of VAT system in the Indian economy, our exports suffer from various cost disadvantages. In addition, factors like inadequacy of infrastructural support in comparison to international standards and high transaction costs due to procedural hassles further blunt our competitive edge.

However, these cost disadvantages were being neutralized, at least to some extent, from the premium accruing from the sale of DEPB licences. Under the new situation brought about by the change in the DEPB notification, this would not be possible any more, he informed.

The IDMA letter to the Finance Minister, Jaswant Singh, pointed out that while the exporters were assured that the DEPB rates would be suitably revised to neutralize the element of SAD, it is now proposed to be done through Duty Drawback route in terms of Circular No. 58/2002 dt. 12.09.2002. "As this will entail fixation of Special Brand rates of Drawback from time to time, this compliances matters and is, therefore, a retrograde step. What the exporters need is a transparent and hassle-free scheme to make our exports effectively withstand competition in the international market," it added.

In view of the above, neutralization of cost-disadvantages by restoration of premium on sale of DEPB licences to a reasonable level is the only viable solution, the exporters lamented. "Hence the restoration of exemption from SAD on imports made under the DEPB scheme should be considered on a priority basis," the exporters asked.