World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

Reply: The matter is under active consideration of the Government. Since it requires amendment to the act, hence, a time frame cannot be committed.

US 62:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (2) Measures Directly Affecting Imports: (ix) Technical regulations and standards: Pages 68 69, paragraphs 103 105:

The United States understands that individual states in India are asking medical devices companies to provide pricing information and plant master files. These devices are distinct from drugs and typically have US Food and Drug Administration approval when exported from the United States. Do states' regulators under the Drugs and Cosmetics Act have the authority to require this information, or does this authority belong to the central government? Please explain the rationale for requesting pricing and other proprietary information on medical devices, and can this objective be achieved in less burdensome and intrusive ways?

Reply: The information of Plant Master File is required to be submitted to the Central Government at the time of registration. There is no requirement for submission of Plant Master File to the state regulatory authorities for imported medical devices. State authorities may however ask for information in certain cases where they have reasons to ask for such information as a regulatory authority.

It is necessary to provide pricing and other proprietary information on medical devices to protect the interest of consumers.

US 63:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (2) Measures Directly Affecting Imports: (x) Sanitary and phytosanitary measures (SPS): Page 71, paragraph 115:

The Secretariat report states that "Currently there is no mandatory labelling requirement for genetically modified (GM) products. However, legislation is in the pipeline: The Ministry of Health and Family Welfare has proposed comprehensive labelling requirements for GM foods, requiring all packages of food/food ingredients of GM origin, that are subject to the approval of the Genetic Engineering Approval Committee (GEAC), to bear a label indicating that they are of GM origin, and that the product has been cleared for sale in the exporting country." Given the broad definition of biotech enhanced food under the proposed legislation, what is India's rationale for requiring biotechnology labelling, as the end product may not even contain genetically engineered material? If such a justification is on the basis of supporting "informed consumer choice," what meaningful information regarding the composition, safety, or special handling requirements for the foods will the mandatory labelling requirement convey? How does India propose to enforce such a requirement?

Reply: The regulation on labelling is under consideration and before notification of the final regulation the draft regulation shall be placed on FSSAI portal for comments.

US 64:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (2) Measures Directly Affecting Imports: (x) Sanitary and phytosanitary measures (SPS): Page 72, paragraph 119:

The Secretariat report states that "In August 2006, the Central Government passed the Food Safety and Standards (FSS) Act of 2006 to consolidate separate laws, and to establish the Food Safety and Standards Authority of India (FSSAI). According to the authorities, this law has been notified (Chapter II(2)(i)). However, the rules and regulations to operationalize this Act have not been notified yet. Once the Food Safety and Standards Regulations, 2010 and Rules 2011 are notified, the Food Safety and Standards Act 2006 will be fully implemented and will repeal some of the separate laws." The United States understands that on August 5, 2011, India fully implemented the Food Safety and Standards Act, 2006. The Act officially repeals the regulatory framework established by the previously existing eight food laws, consolidating them into the Food Safety and Standards Rules and Regulations 2011  under a single regulator  The Food Safety and Standards Authority of India. Does India intend to notify these changes to the WTO in accordance with the transparency and notification obligations under the SPS Agreement? If not, why not?

Reply: It is submitted that Food Safety and Standards Act Rules and Regulations have been fully implemented with effect from 5 August 2011, with this previously existing eight food laws are repealed.

Draft Food Safety Rules 2010 notified on 22.05.2010 to WTO vide notification G/SPS/N/IND/68 and Draft Food Safety Regulations 2011 notified on 7 July 2010 vide notification G/SPS/N/IND/69.

US 65:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (2) Measures Directly Affecting Imports: (x) Sanitary and phytosanitary measures (SPS): Page 74, paragraph 125:

What are the risk and science based justifications requiring that "all consignments containing products subject to genetic modification must carry a declaration stating that the product is genetically modified?"

Reply: The assertion that all consignments containing products subjected to genetic modification must carry a declaration stating that the product is genetically modified, is for the purpose of giving consumers an informed choice.

US 66:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (v) Export prohibitions, restrictions, and licensing: Page 39, para 18, Page 77, paragraphs 131 and 132, (Tables III.15 and Table III.16):

India has taken a number of measures, including at the state level, to restrain exports of steelmaking raw materials, despite the fact that India's growing steel industry itself relies on global trade for access to steelmaking raw materials. Do states have the authority under Indian law to ban the export of any product? Please explain the rationale for maintaining export licensing, bans and other restrictions on iron ore and ferrous scrap, in light of Article XI of the GATT. Also, please explain why export taxes and additional measures are necessary to restrict trade in these raw materials. How does the imposition of export taxes (but very low domestic taxes) contribute to the responsible development of India's iron ore resource? Does India have any plans to reduce or eliminate its trade distorting export taxes on iron ore?

Reply: These taxes are reviewed from time to time. The nature of export restriction depends on the conditions and situations at a given time and is not inconsistent with the WTO provisions. Export regulations are governed by the Central Government.

US 67:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (v) Export prohibitions, restrictions, and licensing: Page 79, paragraph 140:

The Secretariat's report states that "export licensing is sometimes used as a policy tool to ensure the domestic supply of certain products." For example, at different periods in 2010, certain exports of cotton (HS 5201, 5202, and 5203), excluding cotton yarn, (HS 5205, 5206, and 5207), were restricted by an export license or by an export authorization registration certificate that was issued only after the domestic supply of cotton was ensured for the domestic garment and handloom sectors. We understand that the restrictions on the export of cotton have been lifted.  Please explain the rationale for these export restrictions, particularly in light of India's commitments under Article XI and Article XX of the GATT. Also, please indicate whether these restrictions had the intended effect, and whether or not the Government plans to reinstate the restrictions at the start of the new cotton season in October?

Reply: The restriction on export of cotton was imposed temporarily as allowed under Article XI of GATT. Government policy on cotton exports is guided by the consideration of permitting export of surplus cotton from India. Accordingly, exportable surplus is determined from time to time and allowed to be exported either by placing cotton exports under free list or by way of quotas. Export of cotton has been made free for the cotton year 2010 11 (up to 30.09.2011) vide DGFT Notification No. 62 dated 02.08.2011, which is available in the website dgft.gov.in. It is only subject to registration of contracts for export of cotton with the Directorate General of Foreign Trade.

US 68:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 81, paragraph 145:

The Secretariat's report states that India's latest notification to the WTO Committee on Subsidies and Countervailing Measures included tax incentives provided under the Income Tax Act 1961 and to Export Oriented Units (EOUs). The United States would note that after nearly ten years since its last subsidies notification, India recently notified that it maintained only these three subsidy programs despite evidence to the contrary, as detailed throughout the Secretariat's report. Could India please explain why each of the programs, which are detailed throughout the Secretariat's report, is not subject to the notification obligations under Article 25 of the SCM Agreement? If a program is subject to notification, please do so in accordance with Article 25 of the SCM Agreement.

Reply: Several of the schemes detailed in the Secretariat Report are in the nature of duty exemption/duty remissions and are not in the nature of subsidies within the meaning of ASCM. In those schemes, there is a clear co relation between the items permitted for import duty free and their quantity with the corresponding export product. There is no element of subsidy in such schemes as there is an appropriate verification mechanism to check whether any excess quantity of duty exempt material has been allowed for import.

US 69:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 81, paragraph 145:

According to the Secretariat, "During the period under review, India did not make any notifications to the WTO regarding export subsidies on agricultural products." When will India bring its notifications up to date?

Reply: India's notification to the WTO, G/AG/N/IND/8 dated 15 July 2011, related to export subsidy commitments for the marketing years 1995 96 and 2001 02 to 2003 04. Work is underway on India's notifications for the subsequent years.

US 70:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 82, paragraph 149 and page 84, paragraph 153:

According to the Secretariat, the SEZs and the Export Oriented Units (EOUs) are exempt from routine customs procedures. Furthermore, according to the Secretariat, "As in the case of the EPZs, the main objectives of the EOU Scheme is to increase exports and foreign exchange revenues, promote the transfer of latest technologies, stimulate direct foreign investment, and generate additional employment." Do India's labor laws apply to these zones? Are there differing standards or regulations for employment in these areas? Does the Ministry of Labour conduct any labor inspections in these zones?

Reply: The SEZ Act, through an amendment brought about by the Parliament, envisages the Central Government shall have no authority to relax any law relating to the welfare of the labour in the SEZs. All labour laws are applicable in special economic zones. The rights of the workers/labour are therefore protected under the SEZ Act. The Central Government cannot relax any Central Act or any rules or regulations made there under, which would affect the welfare of the labour in the SEZs.

India has ratified ILO Convention No. 81 concerning Labour Inspection, 1947. An "Area Officer System" is in vogue in the Ministry of Labour and Employment under which the Central Government deputes its officers to visit States in order to ensure proper implementation of labour laws (including in the SEZs).

US 71:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 84, paragraph 155; Page 88, paragraphs 165 167; Page 89 paragraph 173:

In addition to the SEZ and EOU programs, the Secretariat's report describes numerous other programs that appear to be export subsidies. These programs include:

• 
  Advance Authorization Scheme;
  
• 
  Duty Free Import Authorization Scheme (DFIA);
  
• 
  Duty Entitlement Passbook Scheme (DEPBs);
  
• 
  Focus Market Scheme;
  
• 
  Focus Product Scheme;
  
• 
  Status Holder Incentive Scheme;
  
• 
  Export Promotion Capital Goods Scheme (EPCGS);
  
• 
  Export and Trading Houses Scheme;
  
• 
  Target Plus Scheme (TPS); and
  
• 
  Exim Bank lending.
  

As noted as well in the Secretariat's report, product coverage and the level of benefits changed during the period under review and new export contingent schemes were implemented. Moreover, based on publicly available information and recent press reports, many of these programs seem clearly to benefit the textile and apparel sector. In light of the WTO Secretariat's calculations that demonstrate India's exports of textile and apparel products are above the export competitiveness threshold as defined by Article 27.6 of the Agreement on Subsidies and Countervailing Measures (G/SCM/132/Add.1/Rev.1), does India recognize its obligation under Article 27.5 of the SCM Agreement to phase out all export subsidy benefits provided to its textile and apparel sector?⁹ If so, could India please explain what concrete steps India is currently taking to phase out these programs and describe the schedule under which these benefits to the textile and apparel sector will be phased out?

Reply As stated in response to question No. 68, several schemes contained in the Secretariat's report are not in the nature of subsidies under the ASCM Agreement and therefore do not require to be notified to the WTO. This issue was discussed in previous Subsidies Committee meetings including the one held in May 2011. India is committed to meeting its obligations under the Agreement but there are issues which need clarity and common understanding before further action can be taken. These issues have been raised in the Subsidies Committee. Clarity on the definition of "product" for the purpose of Article 27.6 is the starting point for phasing out any subsidies. Another issue is the calculation of the time when the obligation to phase out would begin.

US 72:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 84, paragraph 155:

The Secretariat's report states that firms, including those within the textiles and garment industries, that are established within a Special Economic Zone (SEZ) "benefit from several incentives subject to generating foreign exchange earnings within five years of operation." Specifically, the Secretariat's report notes that SEZ units, including those within the textiles and garment industries, are exempt from various taxes, such as income tax, central sales tax, and minimum alternate tax, as well as from a series of state taxes (i.e. sales taxes, stamp duty, and electricity duty). The Secretariat's report states that both SEZs and EOUs are exempt from various taxes, including income tax, until March 31, 2011. Could India confirm whether all of these incentives ended on March 31, 2011, or whether some or all of them have continued past that date? If they have continued, please provide the expected date of termination, if any.

Reply: Provisions relating to EOUs are provided in Chapter VI of the Foreign Trade Policy 2009 14, which may be viewed on http://dgft.gov.in. Income Tax exemption for EOUs has been withdrawn with effect from 1.04.2011.

Facilities available for SEZ units and SEZ developers are provided in the SEZ Act 2005 and SEZ Rules 2006, which may be viewed on www.sezindia.gov.in. Minimum alternate tax (MAT) at 18.5% has been imposed on SEZ units and developers with effect from 1 April 2012. Similarly SEZ developers are now required to pay dividend distribution tax (DDT), on which exemption was available previously.

US 73:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (vii) Export support: Page 85, table III.20:

Will India consider extending to investors that sell in the domestic market the same incentives afforded to investors in export oriented units, e.g., 100 percent foreign direct investment through the automatic route, no requirement for import licenses, single window clearance for central and state level approval procedures, and permission to import second hand capital goods?

Reply: The policy on foreign direct investment, which is equally applicable to export oriented and other units, is specified under the Consolidated Circular on FDI policy ("Circular 1 of 2011"). It is reviewed on a continuing basis, with a view to further liberalising it and increasing its investor friendliness.

US 74:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (viii) Export promotion and marketing assistance: Page 88, paragraph 169:

The Secretariat's report describes various schemes providing "assistance for setting up new export promotion parks and zones (including SEZs) and complementary infrastructure such as road links to ports, container depots, and power supply," unspecified assistance to Export Promotion Councils (EPCs) in their "export promotion activities," as well as "assistance for research on potential export markets." The Report additionally notes that "EPCs and commodity boards also continue to promote exports of specific products" such as textiles, chemicals and leather. Will India notify these financial assistance programs in this regard in light of its obligations under Article 25 of the Subsidies Agreement? If not, please explain why these programs are not subject to those obligations.

Reply: India has notified the programme relating to preferential tax policies relating to setting up of special economic zones (SEZs) and the SEZ units in the notification G/SCM/N/186/IND dated 18 October 2010. Export promotion activities carried out by the export promotion councils (EPCs) need not necessarily be subsidies within the meaning of Article 1 of ASCM. Likewise, subsidies for development of general infrastructure do not require to be notified.

US 75:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (4) Measures Affecting Production and Trade: (i) Incentives: Page 91, paragraph 175:

As the Secretariat points out, India maintains several subsidy programs at the sub central level. However, India has not included any of these sub central programs in its subsidy notifications under Article 25 of the SCM Agreement. Please explain why India has not notified, pursuant to Article 25 of the SCM Agreement, the state level programs which are detailed throughout the Secretariat's report? Does India accept the obligation to notify sub central government programs pursuant to Article 25 of the SCM Agreement? If so, why has India never done so?

Reply: India is making efforts to gather the information relating to support programmes of state governments at sub central level so that these may be notified to the WTO, if required.

US 76:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (4) Measures Affecting Production and Trade: (i) Incentives: Page 91, paragraph 177:

Opening the multi brand retail sector to foreign direct investment (FDI) could provide a stimulus to take advantage of the tax incentive for capital expenditure in the cold chain sector. What are the prospects for FDI liberalization in multi brand retail?

Reply: The existing policy allows for 51% foreign direct investment (FDI), only in single brand retail trade, subject to specified conditions. FDI in multi brand retail trading is presently prohibited. Government of India had released a Discussion Paper on the subject of "Foreign Direct Investment in Multi Brand Retail Trading", in order to obtain stakeholder comments, for informed policy making. Comments were received from a number of stakeholders. The discussion papers, as well as the comments received thereon, are in the public domain. The Government has not taken a final decision in this regard.

US 77:

Report by the Secretariat (WT/TPR/S/249): III. TRADE POLICIES AND PRACTICES BY MEASURE: (3) Measures Directly Affecting Exports: (4) Measures Affecting Production and Trade: (ii) Role of state owned enterprises (other than state trading companies), and disinvestment: Page 96, Paragraph 190:

The Secretariat's Report describes the role of central public sector enterprises in the Indian economy, noting that they continue to play an active role in the economy, and that they hold significant market share in a number of infrastructure sectors. According to the Report, divestments during the review period have been focused almost exclusively in the energy sector. What is India's long term plan for public sector involvement in the economy, particularly in areas such as telecommunications and financial services, sectors of interest to private and foreign investors, and the expansion of which are critical to India's continued economic growth?

Reply: The observation that divestments during the review period have been focused almost exclusively in the energy sector is not correct since disinvestments have been made in other sectors too, for example, mining, shipping etc.

The Government has made a clear commitment to empowering the CPSEs and their managements. It was recognised that public enterprises could not compete effectively with private entrepreneurs without freedom to function and operate commercially. Thus, the concept of Navratna and Mini Ratna was introduced with greater delegated authority, both financial and managerial so as to provide them comparative advantages and to give them greater autonomy to compete in the global market. Government has realized that "Navratnas", "Mini ratnas" and other CPSEs are required to grow and deliver on the promises they have made to their stakeholders. Other reforms have also been announced, such as professionalisation of the Boards of Directors of public sector enterprises and evaluation of performance of CPSEs through memorandum of understanding (MOU).