New TRQ system will scare importers away.

THE DGFT issued a public notice on January 22 outlining the procedure for allocation of tariff rate quotas.

The DGFT has now specified complicated rules under which the quotas would be allowed only to the public sector dinosaurs of yesterday like STC, MMTC, Nafed and NDDB. They will make the imports only on behalf of actual users.

The canalising agencies, two of which are under the hammer of the disinvestment commission, and the much-hated actual users have returned. Apart from skimmed milk powder, maize, sunflower oil and mustard oil are covered in the TRQ system.

Applications must be made to the DGFT headquarters office at New Delhi. An Exim Facilitation Committee (EFC), headed by the DGFT with members drawn from the departments of revenue, agriculture, animal husbandry and dairy and the edible oil commissioner, will take a decision on how much to give to whom. The last date for submission of applications is February 2002 and the consignment must be cleared from the customs before March 31, 2002.

The duty on sensitive items like milk powder, rice and maize were raised following successful negotiation of the zero duty bound at the erstwhile GATT, now WTO, during the 1950s period of food shortages. India offered a TRQ of 15 per cent duty subject to a quota ceiling (10,000 mt in the case of milk powder) as the compensation for hike in the basic duty from zero to 35 per cent in the general case, and 80 per cent in the case of rice.

It remains to be seen whether the TRQ allocation system will work. There are far too many actors in the drama. By the time the importer gets every agency and user in the picture, the thin margins will be severely eroded by transaction costs. Besides, the short period available for importing raising the risk of penalties in the event of inadvertent violation of the quota licence conditions will scare the importers away.

The US, EU and the Cairns group countries will not like the way the Indian government is allocating the tariff quota. A simple first come first served system administered at the ports is what they want. The complex procedures of TRQ allocation will result in firing at the trade disputes front soon.