Exporters have opposed the Kelkar committee's recommendations to do away with all export promotion schemes, other than duty drawback, to lower the incidence of duty on inputs used for manufacturing export items.
They are, however, likely to lose many benefits of the Kelkar proposals in the process.
The Kelkar task force has suggested the all industry-rates of duty drawback should be notified for all items for which the standard input-output norms exist.
If the finance ministry accepts the proposals, the exporters can avail of the duty drawback rates, which are close to the rates notified as the duty entitlement passbook rates. The difference is they will get cash instead of duty credits.
At present, exporters approach the licencing authority to get the DEPB scrip after their shipping bills are cleared, and then get it verified by the Customs.
Under the duty drawback scheme, the shipping bill becomes the application and the money is credited to the exporter's account.
The elimination of the two steps as well as the licence fees will mean less transaction costs for the exporters.
Exporters are also required to pay a sales tax on the DEPB. So, even if they sell their DEPB scrip at say 98 per cent, the amount they retain after discharging the sales tax liability is less than 94 per cent.
The DEPB premiums have already fallen to less than 94 per cent in most cases because the Customs, under pressure to meet their revenue targets, are trying to discourage the acceptance of the DEPB towards the discharge of duty liability.
The DEPB no longer attracts premium higher than 100 per cent because the automatic exemption of special additional duty on exports has been withdrawn since April 2002. The duty drawback scheme on the other hand puts 100 per cent cash in the hands of the exporter.
If the DEPB is abolished and the all-industry rates of duty drawback are notified for all items for which the standard input-output norms exist, the main losers will be the state governments, the Customs, and the bureaucrats at the licencing offices.
The exporters have everything to gain. Yet the exporters want the DEPB scheme to be retained because they neither trust the finance ministry to be fair nor do they trust the Customs to remit the drawback amount quickly.
The Kelkar committee has said exporters need not open bank accounts at the ports from where they export, but banks must remit the amount to the exporter's bank account, wherever he maintains it. This practice is worth implementing even if the DEPB scheme continues.
However, the Kelkar committee has gone overboard in seeking the abolition of the advance licence scheme and the duty free replenishment scheme.
The committee seems to have lacked the resources to address micro-level issues like deemed exports, cases where the standard norms do not exist and so on.
Consequently, even those exporters who have everything to gain have opposed the report. That should please the licencing authorities, the Customs and the state governments.