Of concerns and safeguards

Interview with Murasoli Maran.

The day after presenting the government's Export-Import policy for the financial year, the Union Minister for Commerce Murasoli Maran spoke to Sukumar Muralidharan about its likely implications and the underlying principles. Excerpts:

The Exim Policy has been announced and much of the public attention has been focussed on the removal of quantitative restrictions (QRs). Though this was the most predictable aspect of the policy, it has caused widespread concern and misgivings. How have you addressed these?

We appointed a committee with the Commerce Secretary as chairman and the Secretaries of Agriculture and Small-Scale Industries also involved. They went into each and every subject - how each area would be affected and the kind of safeguards that are necessary. So they gave their report and we have taken all decisions only after that. We have forewarned all the administrative Ministries dealing with this issue and they have in turn consulted the associations and trade bodies concerned. A lot of thinking has gone into these actions.

Basically you have set up this safeguard of constant monitoring of imports and you have also provided for the reimposition of QRs at some stage.

Only if necessary. We have brought in legislation which has already been circulated. We couldn't introduce it because of all the other problems. In the Rajya Sabha it was slated for a particular day but we could not do so because the House was adjourned.

This would allow for a reimposition of QRs only on balance of payments grounds.

We have got seven kinds of protection available. We can raise our tariffs. Second, if dumping takes place - that is, if an exporter sells his product below its value - then we can impose anti-dumping duties. Third, if he subsidises and causes material injury, then we can impose countervailing duty. Both these powers are with the Commerce Ministry. Fourth, if there is a surge causing or threatening to cause serious injury to domestic industry, then there is safeguard action. This power is with the Finance Ministry - it can temporarily impose QRs also. Fifth, according to an Article of the WTO agreement, we can take action to protect human, animal or plant life or health and to preserve morals and to conserve exhaustible resources. Then, under Article XXI of the WTO agreement, we can take action from security concerns. And finally under Article XVIIIB, QRs can be reimposed if the balance of payments position worsens.

The monitoring body that you have proposed will keep a close watch on all these sectors in order to determine when action would be warranted under any of these provisions.

We will have an inter-ministerial monitoring body consisting of the Secretaries for Commerce, Revenue, Agriculture, Small Scale Industries, Animal Husbandry, and the Director-General of Foreign Trade. I am calling it a "war room" because they would have to be watchful and we may have to declare war against surges in imports and dumping. We have taken about 300 sensitive items as suggested by the inter-ministerial group. We will monitor these items - we should not be taken aback by any development and there should not be any disinformation among the public. Just as in the case of inflation figures and industrial production figures, we are going to release these figures every month.

In terms of small-scale industry, what is the thinking now, since the removal of QRs means that the reservation policy becomes irrelevant?

It was irrelevant even earlier, since about 800 items were reserved for SSI, but only about 600 were actually produced. But in spite of this nobody could prevent imports. So it was an anomalous situation. Now recently in his Budget speech, the Finance Minister has announced the removal of 14 items from the reservation list. There was a Group of Ministers with (Home Minister) Mr. Advani as chairman. I was also a member and we decided to remove these items from the reserved list because they are very good export earners. Scale of operation is very essential in these. Most important, a comprehensive package on the SSI and tiny sectors was announced by the Prime Minister on August 31. For example, the excise duty limit has been raised from Rs.50 lakhs to Rs.1 crore, to improve the competitiveness of the SSI sector. Then we have provided credit-linked capital subsidy of 12 per cent on loans for technology upgradation. And so on.

Over the last few years there have been a lot of reports of acute distress in certain SSI sectors, such as pencils, stationery, toys, and so on.

You see, if one unit is closed it is one thing - it could be due to inefficiency. But if the entire sector is affected, that is a different matter. For example, regarding certain Chinese goods - toys and sports shoes - there has been immediate action and anti-dumping duty has been imposed.

Would you say that there has been no evidence of large-scale distress in the SSI sector?

Whenever we hear reports we look into them and take all the necessary action.

What about agriculture and plantation and orchard crops?

In the recent Budget, tariffs were raised in the case of tea, coffee and other crops. There is a psychological element here. They say increase it still more. I said: for what purpose? Where are the imports? The figures should speak for themselves. Then they say it is for psychological satisfaction.

But in a plantation-crop dependent State like Kerala, there are widespread apprehensions about this Exim policy.

Over what crops?Coconut and coconut oil, for instance...

These have been reserved for state trading enterprises. They will not be allowed through private trade - along with rice, wheat, maize, petroleum products and urea.

Is this procedure of canalisation allowed under WTO rules?

You may consider it as canalisation, but this kind of trade through state trading enterprises which is done on commercial principles, is permitted under WTO rules - under article XVII of the agreement. We have taken competent legal opinion on this matter.

What is the progress with regard to the special economic zones (SEZs) that you launched last year?

I have inaugurated one at Nangunery in Tamil Nadu and one at Positra in Gujarat is about to be inaugurated. Then we have granted permissions for SEZs in Maharashtra, West Bengal, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh - and two in Orissa.

Have all the special tariff measures that you had recommended been conceded by the Finance Ministry?

Many have been granted. As far as SEZs are concerned, there is no problem at all.

Since last year's Budget, export incomes are beginning to be taxed and all exemptions will be removed over a period of five years.

We want it back-loaded - remove less of the exemptions in the first three years and more in the last two years. We have had discussions but because the Finance Bill is yet to be passed, we cannot say anymore.

On the WTO, you have submitted certain proposals for the agriculture negotiations.

We have proposed a "food security" box for exempting certain kinds of activities from WTO rules. We have asked the OECD (Organisation for Economic Cooperation and Development) countries to reduce their subsidies so that we can also participate. Since 1995 the WTO rules have been in operation and what has happened since then? In fact, the WTO has been beneficial, since we had bound our tariffs for agricultural products at zero. We were at that time food importers, getting aid from the U.S. and leading a "ship-to-mouth" existence. What has happened now is that we have enhanced our bound duty rates to 100, 200 and 300 per cent. In all of these years, nothing has happened.

There is a perception in the farm sector that the WTO rules are doing damage.

That is why we have come up with these kind of explanations. We did not sign this yesterday, but government is a continuum. We have to continue, but we will take into confidence all the parties and State governments.