World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

Reply: Currently motor third party insurance is mandatory for any vehicle that is to be driven on the road. The premium rate for this insurance is mandated by the regulatory authority.

It was observed that the premium rates charged were not adequate to cover the cost of claims. The insurance companies were therefore reluctant to underwrite this line of business resulting in commercial motor vehicle owners not getting insurance covers. In order to overcome this difficulty the regulatory authority created a pool mechanism for the third party risks of commercial vehicles. While the supply side issues of motor third party insurance were removed by the creation of the pool, the issues on the demand side (premium adequacy) still remained. In order to overcome the motor third party pool deficit, the insurance amendment bill proposes to make it mandatory for non life insurers to write a certain percentage of their total business as motor third party insurance. This will enable the insurers to exercise better control over the business they underwrite and be responsible for the quality of risks they accept. The regulatory authority will issue regulations in this regard once the insurance amendment bill is passed.

(c) Securities

(Question 41: Page 154, paragraph 112)

The Secretariat's Report states that "the regulatory framework was modified to enable participation of FIIs and mutual funds in IDRs". Japan would like to know whether this includes easing restrictions on FIIs. Please provide more details.

Also, Japan would like to know about the progress in the modifications.

Reply: In order to develop a liquid market for Indian depository receipts (IDRs) by encouraging participation by institutional investors, SEBI, vide an amendment in 2009 to the SEBI (FII) Regulations, 1995, had permitted participation by foreign institutions in IDRs Accordingly, Regulation 15(1) of the SEBI (FII) Regulations which lists the avenues for investment by FIIs was modified to include IDRs as well.

(iii) Telecommunications

(Question 42: Page 157, paragraph 119)

The Department of Telecommunications (DoT), at the Ministry of Communications and Information Technology amended the guideline for security related concerns for the expansion of Telecom Services in March and May, 2011. According to the guideline, it is stipulated that the licensee may only induct network elements into his telecom network which have been tested by a relevant contemporary Indian organization. It is also stipulated that only Resident and trained Indian Nationals can handle interception and monitoring cases. Japan considers these regulations may disadvantage to foreign made goods or operators compared to domestic goods and operators, and is incompatible with WTO Agreements. In this regard, please describe the specific views of India. Also, Japan would like to know what India thinks about notifications based on the TBT Agreement with regard to this regulation.

Reply: Compliance is not about Indian contemporary organisation, but it is that network elements should have been got tested as per relevant Indian or international security standards.

Indian residents are only prescribed for security sensitive posts.

(Question 43: Page 158, paragraph 122)

According to the Secretariat's Report, even though there are 164 internet service providers in India, BNSL and MTNL account for 70% of all subscriptions. What does the Government of India think are the possible reasons for this situation, from a competition perspective?

Reply: Broadband penetration is presently dominated by wire line based connection. BSNL/MTNL are dominant players in wire line market. Mobile technology based broadband is also now growing as 3G technology are being rolled out.

(Question 44: Page 159, paragraph 123)

The Telecom Regulatory Authority of India (TRAI), released a Consultation Paper on Encouraging Telecom Equipment Manufacturing in India, in December 2010 and issued recommendations, in April 2011. Japan recognizes that this provides preferred access to products created in India and a similar measure has been considered for electronic devices in the Department of Information Technology(DIT). Japan is concerned that these measures might be incompatible with WTO agreements such as national treatment obligation under GATT or GATS. Could India give its views about this?

Reply: The draft guidelines of Department of Information Technology are under the consideration of the Central Government and policy decision has to be taken. Similarly the TRAI recommendations on telecom equipment manufacturing policy are under consideration by the Central Government and the policy has not yet been formulated. It may be premature to comment on the aspect of compatibility with GATT or GATS.

(Question 45: Page 161, paragraph 130)

According to the Secretariat's Report, funds from the USOF are allocated to "eligible operators," and such eligible operators are specified by the government from time to time. What criteria does the government take into consideration when making its decision about which operators are eligible?

Reply: The main criteria will be type of services proposed to be provided. The "eligible operators" means the basic service operators, cellular mobile service providers and unified access services licences, infrastructure providers and internet service providers or any other entities as may be specified in this behalf by the Central Government from time to time. All the details about USOF activities are given on www.uso.gov.in.

(Question 46: Page 161, paragraph 131)

India doesn't commit itself to the "Engaging in anti competitive cross subsidization" and "cost oriented inter connection charges" mentioned in the Reference Paper. Is this because Access Deficit Charge in India acts against those rules? If there are any other reasons, Japan would like India to explain its background rules. Moreover, Japan would like to know if there is any possibility of this regulation being amended in future.

Reply: The Access Deficit Charge has already been abolished. India has maintained measures for the purpose of preventing service suppliers from engaging in or continuing in anti competitive practices.

(iv) Transport

(a) Maritime transport

(Question47: Page 163, paragraph 137)

As mentioned in para.137 on page 163, "Providers would be required to register with the Directorate General of Shipping (DGS) and notify their tariffs". Japan would like to know what duties are imposed on service providers if the providers are foreign shipping companies or foreign maritime agencies.

Reply: For the purpose of this Act, the shipping services are required to register as per Section 5 of the Act. The other sections of the Act are applicable in toto thereafter. This implies that there is no discrimination between a foreign service provider and Indian service provider as far as obligation under the Act is concerned. The entry for foreign ship companies or foreign maritime agencies is regulated as per the national laws. FDI allowed in this sector is 100%.

(Question 48: Pages 163 164, paragraph 140)

As mentioned in para.140 on page 163 164, India introduced a tonnage tax in 2005 based on "The Income Tax Act 1961, as amended on 1 April 2005". With regard to this tax system, Japan would like to ask the following four questions;

(1) why has the government introduced this new tonnage tax (for example, was it to increase the number of Indian flagged vessels, etc.)?

(2) how is the tonnage tax designed? For example, its range (which flag of registry), the requirement in the rate of Indian vessels, the treatment if someone's applicant does not fulfil the requirements, etc. (if it is not an imposition)?

(3) whether there are any other preferential tax systems than the tonnage tax, what kind of tax system India will introduce in future or has currently introduced for ships, international shipping operators or ship owners. (Japan would like to know in particular, who is eligible, what kind of taxes exist, what is the idea behind the measures (for example, special depreciation on ships for ship owners, deductions for Indian international shipping operators, etc.)?

(4) if there are any other preferential measures than this tax system, what kind of measures will India introduce in future or has introduced recently?

Reply (1): The slow growth of Indian shipping tonnage especially in the context of rapid growth of the merchant shipping fleet in other similarly placed countries was viewed with concern by Government of India. In the light of the various representations received on the need for a level playing field for India shipping industry vis à vis international shipping and the urgent need to address the problem, a seven member expert committee had recommended that the Govt. must recognize the vital role of shipping in the national economy and provide a fiscal regime for Indian shipping taking into account the fact that more than 90% of the world tonnage is on a very low level of taxation and thus there is a need to provide level playing field so that Indian shipping becomes internationally competitive. In order to facilitate this, the committee recommended that a tonnage tax scheme be devised to be implemented effective from FY 2002 03. However, after deliberations and consultations with INSA, the tonnage tax scheme was introduced in the Finance Bill, 2004 and came into force with effect from 1.4.2004. Initially the benefit of tonnage tax was applicable to shipping companies only. From FY 2005 06, the tonnage tax benefits have been extended to dredgers also.

Reply (2): To be eligible to get the benefit of tonnage tax, a company should be a qualifying company and its vessels qualifying vessels as defined in section XII G of the Indian Income Tax Act, 1961. The qualifying company is defined in section 115VC of Chapter XII G of Indian Income Tax Act, 1961. The Income Tax Act is available on the website www.finmin.nic.in.

Reply (3): The tonnage tax scheme is applicable for Indian shipping companies only. India has not introduced any new differential tax system for international shipping operators or ship owners so far.

Reply (4): India has not introduced any other preferential measures in this regard.

(Question 49: Page 165, paragraph 146)

After the Major Ports Regulatory Authority Bill is enacted, how will port charges be decided? Will the Government still be able to intervene in decisions about port charges（especially in the EnnorePort）?

Reply: The Major Port Regulatory Authority Bill is in preparatory stage. Comments on the Bill are being taken on the various items of the Bill from all stake holders. The content of the Bill including port charges etc. will be clearer once the Bill is finalized. It will be premature to comment on the aspects of the bill at this stage.

(v) Tourism

(Question 50: Page 178, paragraph 192)

Japan would like to know if the government of India has any intention to review the causes of low FDI inflows (i) No foreign presence is allowed in travel agencies, tour operators or tourist transport operators and/or ii) multiple taxes on tourism services at central and state level) in the tourism subsector.

Reply: Hotel and tourism sector has been open for FDI up to 100% on automatic basis. The Ministry of Tourism grants approval/recognition and not licences to the various service providers in the categories of inbound tour operators, domestic tour operators, tourist transport operator, adventure tour operator and travel agencies as per the revised guidelines dated 18.07.2011. The aims and objectives of the scheme for recognition of service providers in all the said five categories are to improve their quality standard and service so as to promote tourism in India and abroad. The FDI in hotel sector has been increasing since April 2000.

Thus India has a liberal policy in the sector to promote foreign investment. India has also offered market access to tourist guides services up to a total ceiling of 500 tourist guides conversant in Chinese, Spanish, Portuguese, French and Japanese languages.

APPENDIX TABLES

III. TRADE POLICIES AND PRACTICES BY MEASURE

(Question 51: Page 216, AIII.6 Export incentives schemes, 2007 11)

According to the information available on the website of the Ministry of New and Renewable Energy, the Ministry has been conducting a solar power project named the "Jawaharlal Nehru National Solar Mission (JNNSM)" which consists of several sub programs. Please provide an overall picture of this project as well as the details of each sub program, such as the eligibility, terms and conditions, amounts and recipients of these projects.

Reply: The Jawaharlal Nehru National Solar Mission (JNNSM) envisages a target of 20 000 mw solar energy and stipulates implementation and achievement of the targets in three phases – first phase up to 2012 13, second phase 2013 17 and the third phase from 2017 22. The Mission provides immense opportunity for investments, both domestic and foreign. In the first phase, the Government of India would be directly purchasing 1000 mw capacity solar power from the project developers through NTPC Vidyut Vyapar Nigam Ltd. The broader goal is to promote ecologically sustainable growth while addressing India's energy security challenge. It will also constitute a major contribution by India to the global effort to meet the challenges of climate change.

More details of the programme can be found on the website www.mnre.gov.in.

(Question 52: Page 216, AIII.6 Export incentives schemes, 2007 11)

The guidelines for some sub programs, such as the 'Guidelines for Selection of New Grid Connected Solar Power Projects' or 'Guidelines for Rooftop PV and Small Solar Power Generation Program', include domestic content requirements. Please list the sub programs of the JNNSM which include domestic content requirements and give details of these requirements. Are there any project proponents who have fulfilled the domestic content requirements and have participated in the programs?

Reply: The details of the programme can be found on the website www.mnre.gov.in.

The Report by India (WT/TPR/G/249)

II. ECONOMIC ENVIRONMENT

(6) CHALLENGES

(iii) Infrastructure

(Question 53: Page 16, paragraph 42)

Could India provide details of the infrastructure investment and development in the 12^th Five Year Plan? When will it be made public?

Reply: The Twelfth Five Year Plan of India, to be applicable for the period 2012 2017 is still to be prepared and adopted.

III. MOVING AHEAD ON REFORMS

(2) FINANCIAL SECTOR REFORMS

(Question 54: Page 18, paragraph 54)

Japan would like India to clarify the relationship between the newly set up Financial Sector Legislative Reforms Commission (FSLRC), the Financial Stability and Development Council (FSDC) and existing financial authorities (Ministry of Finance, Reserve Bank of India, etc.), including the structure and functions of those new organizations.

Reply: Through a resolution dated 24 March 2011, the Government set up the Financial Sector Legislative Reforms Commission (FSLRC) with a view to rewriting and harmonizing the financial sector legislation, rules and regulations to address the contemporaneous requirements of the financial sector.

The Commission will make its recommendations within 24 months of the date of the resolution. It is chaired by Supreme Court Justice (Retd.) B. N. Srikrishna, and has ten members with expertise in the fields of finance, economics, law and other relevant fields.

The FSLRC can call for such information and take such evidence as it may consider necessary from various sources including Ministries and Departments of the Government of India and State Governments. The Commission will also engage with the inter regulatory body the Financial Stability and Development Council (FSDC) as a part of this exercise.

The apex level FSDC was set up by the Government on 30 December 2010 with a view to strengthen and institutionalize the mechanism for maintaining financial stability and enhancing inter regulatory coordination. The Chairman of the Council is the Finance Minister of India and its members include:

• 
  Financial sector regulatory organizations: the heads of the financial sector regulatory authorities: Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory Development Authority (IRDA), Pension Funds Regulatory Development Authority (PFRDA);
  
• 
  Ministry of Finance: Finance Secretary and/or Secretary, Department of Economic Affairs (DEA); Secretary, Department of Financial Services; and the Chief Economic Adviser.
  

This Council will monitor macro prudential supervision of the economy, including the functioning of large financial conglomerates. It will address inter regulatory coordination issues and thus spur financial sector development. It will also focus on financial literacy and financial inclusion. A sub committee of FSDC has also been set up under the chairmanship of Governor, RBI.

(3) Reform in Foreign Investment Policy

(Question 55: Page 19, paragraph 57)

With regard to India's Foreign Direct Investment Policy on distribution service sectors, Japan understands that it is under consideration to allow foreign direct investment in multi brand retail up to 51% under a certain condition. Japan would like to know the perspectives to implement this policy.

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.

(Question 56: Page 19, paragraph 57)

Japan would like India to describe the following information concerning legal services.

(1) Despite the liberalization of FDI in various industries, the foreign law firms are not allowed to open office in India. Will India undertake any possible reform of legal services?

(2) With regard to legal services, what kind of activities can foreign legal service providers be engaged in?

Reply: At present Foreign Law Firms are not allowed to practice in India. Under the Indian Advocates Act, 1961 they are prohibited from giving any legal advice that could constitute practicing Indian Law. Currently this sector is governed by self regulatory professional body (Bar Council of India). As of now no change in the existing regime in the sector is contemplated.

KINGDOM OF SAUDI ARABIA

Kingdom of Saudi Arabia 1:

Report by the Secretariat (WT/TPR/S/249): III. Trade Policies and Practices by Measure: (2) Measures Directly Affecting Imports: (viii) Contingency measures (a) Anti dumping and countervailing measures

Paragraph 77 states:

An investigation may be terminated by the DGAD at any time if: there is a written request from or on behalf of the domestic industry at whose instance the investigation was initiated; there is insufficient evidence of dumping or injury; the injury is negligible; the margin of dumping is less than 2% of the export price; or the volume of the dumped imports is less than 3% of imports of the like product, unless the countries accounting for 3% individually account for over 7% collectively of imports of the like product. (emphasis added).

Question: In considering whether there is insufficient evidence of dumping or injury, how does India consider the evidence in light of WTO Agreement disciplines? For example, in determining whether a "particular market situation" exists in dumping proceedings, how does India consider evidence in light of the interpretation of this term under Article 2.2 of the Anti Dumping Agreement?

Reply: A determination whether "particular market situation" exists is made in the context of a specific anti dumping investigation. An important consideration being, whether due to "particular market situation" the domestic market sales permit a proper comparison for dumping margin determination.

Kingdom of Saudi Arabia 2:

Report by the Secretariat (WT/TPR/S/249): III. Trade Policies and Practices by Measure: (2) Measures Directly Affecting Imports: (viii) Contingency measures (a) Anti dumping and countervailing measures

Paragraph 79 states:

The DGAD conducts mid term reviews to assess the need for continued imposition of anti dumping duties. These reviews may be self initiated or on request from an interested party and in view of changed circumstances. The review follows the same procedures prescribed for an investigation to the extent that they are applicable. In 2010, a trade notice was issued to clarify the initiation of mid term reviews.³ The notice indicates that an application for initiation of a mid term review of an anti dumping duty in force may be made to the DGAD by an interested party including exporters, importers, domestic producers, trade representative bodies, firms or institutions, which are representative of the domestic industry. The applicant must submit positive information substantiating the need for a review. The notice also indicates that the application for an interim/mid term review may be accepted by the DGAD provided that a reasonable period of time, i.e. at least one year, has elapsed since the imposition of the definitive anti dumping duty by the Central Government. However, the DGAD may review the need for the continued imposition of the duty, where warranted, on its own initiative.

Question: In the context of mid term reviews, how does India ensure that its review of the dumping calculation complies with WTO disciplines?

Reply: The methodology used by India for calculation of dumping margin in the original investigation and in the mid term review investigation is consistent with the WTO Anti Dumping Agreement.

TRADE POLICY

Kingdom of Saudi Arabia 3:

Report by the Secretariat (WT/TPR/S/249): III. Trade Policies and Practices by Measure: (2) Measures Directly Affecting Imports: (viii) Contingency measures (a) Anti dumping and countervailing measures

Paragraphs 85 and 86 state (footnotes omitted):

85. 
    India is one of the most active users of anti dumping measures among WTO Members. From the inception of the WTO until 30 June 2010, India accounted for 436 of the 2,433 anti dumping measures adopted by Members, that is 17.9% of the total. During the same period, India initiated 613 investigations, out of a total of 3,752. The initiations affected mainly China (137), Korea, Rep. of (47), Chinese Taipei (45), the EU (42), Thailand (36), Japan (30), the United States (29), Indonesia (24), Singapore (23), Malaysia (22), and the Russian Federation (19).
    
86. 
    Between January 2006 and 31 December 2010, India initiated 209 anti dumping investigations against 34 trading partners, compared with 176 reported in its last Review (Chart III.4).
    

Question: In light of India's prolific use of trade remedy measures, can India confirm that it conducts its proceedings consistently with WTO agreements and jurisprudence?⁴