PLUGGING IMPORT LEAKS

Last year, Varun Mittal, a Ludhiana-based manufacturer of knitted goods, observed an unusual trend in import of a key raw material (a fabric item) just after the government imposed anti-dumping duty on it to discourage imports. The import of this polyester component – trade items are identified by a globally recognised, harmonised system of nomenclature code (HSN Code or simply tariff code) – fell 99 per cent. But import under another tariff code, specified for a slightly different type of fabric item, went up by almost the same amount. “There are more than 400 HSN codes that deal with fabric. Each number has different rates. If you persuade the government to impose anti-dumping duty on some, the trade shifts to other tariff lines,” says Mittal.

This is important as India has been increasingly using ‘tariffs’ to protect domestic industry in recent times. Its attempts are being defeated by the practice of exporters shifting from specific tariff lines to more generic categories. In fact, an unusual increase in imports under the ‘others’ category was one of the key problems the Narendra Modi government identified in the early days of its current tenure. “A Committee of Secretaries, set up by the prime minister, is looking into the