The government is planning to replace DEPB, the popular tax remission scheme for exporters, with a new one where rates would be brand-specific. Under the new scheme, benefits would be quantified on the basis of actual consumption of imported inputs by the manufacturer-exporter, instead of the industry-average norm under DEPB.

The government has already said the duty entitlement pass book (DEPB) scheme, seen as WTO-incompatible due to its alleged subsidy element, would cease to exist after June 30.

The move to replace DEPB with a brand rate scheme could be welcomed by big manufacturing companies including automobile and metal majors, but smaller firms could find the new scheme unattractive. Sources said all products (defined by harmonised code system) now covered under DEPB would also be included under the duty drawback scheme for the benefit of smaller firms. However, these companies, especially those in labour-intensive industries like textiles and leather are unlikely to be pacified as the drawback scheme is known for more rigorous rate fixation.

?Both DEPB and drawback schemes have infirmities as the rates are fixed on the basis of the ?averaging principle? rather than actual incidence of duties,? said KT Chacko, director, Indian Institute of Foreign Trade. There is a need to increasingly rely on brand rates for accuracy, Chacko, who was director-general of foreign trade and chaired a panel for revamp of the export promotion schemes, said.

?We want to move from notional claims by exporters to actual ones. So, brand rate fixation scheme is one of the options. The finance ministry and the commerce ministry are working on it,? a finance ministry official told FE. Commerce minister Anand Sharma is likely to meet finance minister Pranab Mukherjee on the issue soon.

For fixation of brand rate, an applicant has to file for fixation of rates to the commissioner of drawback. The rates are then fixed by the commissioner after receipt of verified data filed by the exporters. The official further said the brand rate scheme would be fully compliant with WTO’s agreement on subsidies and countervailing duties. He, however, said that many things needed to be sorted out before moving to the proposed scheme.

?The input-output ratio needs to be fixed. We will also have to look at the criteria of rejection and about wastage, among others,? the finance ministry official added.

Reliance Industries, Hindalco, SAIL, Tata Steel, Bajaj Auto and Hyundai India have been among the largest beneficiaries of the DEPB scheme. FIEO director-general Ajay Sahai said: ?The brand rate fixation scheme would not help small-scale industrial units, which are large in number. The brands are of large corporates only. So the scheme is not feasible for all.? In 2010-11, the government lost around R55,000 crore on account of various export promotion schemes.

Under DEPB, the exchequer suffered a loss of R8,520 crore, while it was R15,704 crore in case of the Advance Licence Scheme. In the case of the Export Oriented Units, Software Technology Parks and Export High Technology, the revenue foregone was R10,000 crore. Similarly, the revenue foregone in the last fiscal over the SEZ scheme was roughly R8,500 crore.

The government also suffered revenue loss in other schemes such as EPCG, Vishesh Krishi and Gram Udyog Yojana, among others. The government’s vision is to consolidate all these export promotional schemes into one, which is likely once GST comes into place. According to Sahai, ?the long-term view of the government is to do away with many such schemes.

Once GST is implemented, it can be divided into two parts ? those who want exemption and the other who could claim refunds.?