DIPP secy takes on commerce min over FTAs

Written by Arun S | Updated: Jul 29 2014, 19:43pm hrs
The wrangling within the commerce and industry ministry over the desirability of more free trade pacts has intensified.

Delivering a riposte to commerce secretary Rajeev Kher, who had argued for more FTAs and CEPAs, secretary in the department of industrial policy and promotion (DIPP) Amitabh Kant last week told Kher that rather than signing more such pacts, the country should focus on implementation of the National Manufacturing Policy (NMP) and reap the countrys demographic dividend (60% of Indians are in working age group of 15-59 years).

In a letter to Kher last week, Kant said FTAs/CEPAs would adversely affect NMP and make it difficult to achieve the targets mentioned therein. The NMP envisages raising the share of manufacturing in the GDP from around 15-16% (the level where it has stagnated since 1980s) to 25% and generating 100 million additional jobs by 2022.

The DIPP secretary said the duty concessions under the free-trade pacts have resulted only in an increase in imports from the partner countries, but not a corresponding growth in Indias exports to them. Besides, the FTAs have led to an inverted duty structure (where the duty on the final product is nil or low, while raw materials/intermediates attract higher duty), the DIPP said, a point which the recent Economic Survey also highlighted. This inverted duty structure is harming domestic manufacturing especially that of capital goods, indigenisation of technology, local value addition and job creation, Kant said.

Kant is believed to have cited Tariff Commission reports that pointed out the inverted duty structures on several items and said this anomaly needs to be removed. The Budget 2014-15 has addressed the issue partially by reducing the import duties on some inputs and raising duties on certain finished products.

When contacted, Kant refused to comment, but sources in DIPP and commerce department told FE that he indeed replied to Khers letter last week. The DIPP is trying to protect the manufacturing sectors interests, said a source.

Kant is understood to have written in the letter that the Tariff Commission reports have been endorsed by the National Manufacturing Competitiveness Council, some Parliamentary panels and several other ministries. The reports are also being looked into by the Competition Commission of India from the competition law and market distortion perspectives.

Kant is learnt to have sought caution while negotiating FTAs and he added the government should hold more stakeholder consultations before signing and reviewing such pacts. In addition, the DIPP secretary has also called for an internal discussion on the ongoing studies on the impact of FTAs.