WTO flags poor utilisation of India scheme for least developed countries

About 85 per cent of about 11,000 products offered at zero tariff by India to least developed countries (LDCs) under the duty-free quota free (DFQF) scheme of the World Trade Organisation (WTO) remains unutilised, according to a report by the LDC Group at the multilateral trade body.

The decision to provide duty free quota free (DFQF) access for LDCs was first taken at the WTO Hong Kong Ministerial Meeting in 2005. The decision requires all developed and developing country members declaring themselves in a position to do so, to provide preferential market access for all products originating from all LDCs.

India became the first developing country to extend this facility to LDCs in 2008, providing market access on 85 per cent of India’s total tariff lines to better integrate LDCs into the global trading system and improve their trading opportunities. The scheme was expanded in 2014 providing preferential market access on about 98.2 per cent of India’s tariff lines to LDCs. India offers 11,506 preferential tariff lines to LDCs of which 10, 991 are duty-free. Of the duty-free tariff lines, 1,129 are agricultural goods and the remaining 9,862 are non-agricultural goods.

According to WTO data for 2020 presented in the report, 85 per cent of the tariff lines show zero utilisation rate compared to 64 per cent by China and only 8 per cent demonstrate a utilisation rate of above 95 per cent against 17 per cent by China. “The remaining 7 per cent (99 out of 1,505 tariff lines) are distributed in between with a slight polarisation towards 0 and 95 per cent.”

“There is a significant variation between the beneficiary LDCs, and the two countries (Guinea and Bangladesh) showing the highest amount of eligible imports simultaneously have very low utilisation rates (8 per cent for Guinea and 0 per cent in the case of Bangladesh). Benin on the other hand, reports a utilisation rate of 98 per cent, which is the highest of all beneficiary countries,” the report pointed out.

The report said as is the case for China, noteworthy amounts of LDC exports are entering under non-preferential (most favoured nation) tariff route into India even though they are covered by the Indian preference scheme. “The preference margins are important, which indicates major potential duty savings. In the case of fixed vegetables oil exported from Bangladesh to India, there is a preference margin as high as 77.5 percentage points, which would mean $74 million duty savings if the preference scheme was used. Most likely, this is not due to lack of awareness from the exporters’ side but rather existing barriers to make use of the preferences,” the report stated.

Providing more such instances, the report said fruits and nuts worth $325 million exported by Afghanistan, entered under MFN despite the preference margin of 28 percentage points being offered under the Indian preference scheme. “If the preferential treatment is granted, a potential duty saving of $91 million could be possible. In case of Chad, exports of mineral fuels, oils and products, etc, from HS chapter 27 to a value of $48 million are entering India under MFN, and with a preference margin of 5 percentage points utilisation of the preferential treatment would implicate potential duty savings of $2.4 million,” it said.

The report, however, contended that there may be data gaps. “The LDCs fully understand and appreciate that the data may be incomplete and as such may not provide an accurate representation of the utilisation rates of China and India. For this reason, LDC calls on China and India to redouble efforts to provide the WTO secretariat with an appropriate and complete set of data. The LDCs further invite China and India to also share their own analysis based on the notified data to the WTO secretariat at the next committee on rules of origin,” it added.