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States advised not to violate international obligations — Jaitley

By Our Special Correspondent

CHENNAI JAN. 3. The Centre has `advised' States to ensure that they do not violate India's international obligations by way of discriminatory domestic taxation, according to the Union Minister for Commerce and Industry, Arun Jaitley.

Asked at a press conference whether the levy of higher sales tax on imports by some States, including Tamil Nadu, compared to the tax on the corresponding indigenous product, nullified the Centre's notified levels of tariff protection and violated the Centre's sovereignty, Mr. Jaitley said sovereignty was `too strong a word'. It was true that the country as a whole had to honour its international obligations (by according national treatment to imports). "Wherever this issue has arisen, we have advised the State concerned to ensure compliance on its part with the country's international obligations," he said.

Mr. Jaitley said India would respond to the European Union's (EU) request for consultations at the dispute settlement mechanism of the World Trade Organisation (WTO), where the EU has recently challenged the entire gamut of anti-dumping duty procedures followed by India. He pointed out that all along, these questions had not been raised by anyone in India's appellate system and courts. "In fact, it is India that has successfully challenged in the WTO the EU's anti-dumping procedures in the cotton bed linen case," he remarked.

The Minister said the Government had `taken note' of the problem of inversion of import duties on consumer electronics products and their inputs in the case of items covered by the early harvest programme under the Free Trade Agreement (FTA) with Thailand. "More and more products will face this problem" as a result of FTAs, and the Government would consider the issue appropriately. Regional trade agreements were necessary for countries to reduce their input costs and improve market access.

On the issue of appreciation in the value of the rupee vis-a-vis the dollar, Mr. Jaitley said handling the forex issue was the prerogative of the Finance Ministry and the Reserve Bank of India (RBI). However, he would consider what alternative package could be introduced to offset at least partly the negative impact of the exchange rate on the competitiveness of Indian exports.

Earlier, addressing a pre-Exim-policy open house session organised by the Federation of Indian Export Organisations-Southern Region (FIEO-SR), Mr. Jaitley said last year was marked by a `change in the mindset' of Indian industry and exporters as also perception of India on the part of the world. If, ten years ago, India had gone in for a plethora of FTAs, there would have been cries for protection. Now, Indian industry was on the road to achieving competitiveness by improving productivity and quality and cutting costs and had become confident. As a result, despite the strengthening of the rupee, many sectors had done well on the export front, and only a couple of sectors such as textiles and apparel had felt acute pressure on their margins. The global community no more looked at India as a `sleeping elephant' and was aware of its potential.

Also, for the first time Indian businessmen accompanying him on visits abroad had shown interest in setting up manufacturing facilities in those countries, including in China and Germany, Mr. Jaitley said.

Assuring exporters that their concerns would be taken into account while formulating the Exim policy statement this year, he said, "We do not want one of our most important and emerging sectors (namely, exports) to be an exception to the feel-good factor," he added.

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