India begins anti-subsidy probe against China .

Being an oxidising as well as a reducing agent, sodium nitrite is a white crystalline powder widely used in pharma and dye industries, lubricants, construction chemicals, rubber blowing agent, heat transfer salts, meat processing and textiles. By and large, sodium nitrite is primarily used in dyes industries for producing various types of intermediates and in pharmaceutical industry for production of analgin, theophylline, and caffeine.

Subsidy issue

Following a petition by Deepak Nitrite Ltd, which accounts for more than 50 per cent Indian production, the Designated Authority in the Directorate General of Anti-Dumping & Allied Duties has initiated the countervailing duty probe on imports of sodium nitrite from China. The petitioner has alleged that producers of sodium nitrite from China have benefited from a host of countervailable subsidies. They advanced evidence showing existence of certain schemes/programmes claiming that the same constitute countervailable subsidies to vindicate initiation of a probe.

The petitioner highlighted China’s grant programmes, preferential lending, income tax programmes conferred by the Chinese authorities for foreign invested enterprises (FIEs), corporate income tax refund programme for reinvestment of FIE profits in export-oriented enterprises, preferential tax policies for R&D for FIEs, income tax credits on purchases of domestically produced equipment applicable to domestically owned companies, provision of electricity, natural gas, water utilities for less than adequate remuneration and provision of land for less than adequate remuneration.

When the Authority held pre-initiation consultations with representatives of the Government of China in November 2008 here, the Government of China claimed that a number of schemes/programmes did not exist or were revoked/modified during the period of investigation. Incidentally, the period of anti-subsidy probe is from April 1, 2007 to March 31, 2008, though the injury investigation period covers the fiscal years of 2004-05, 2005-06 and 2006-07 too.

China’s claims

The Authority contended that the claims of the Government of China have been taken on record and would be further examined during the course of the probe. However, the Authority maintains the existence of sufficient evidence on the doling out of countervailable subsidies by China to justify initiation of anti-subsidy investigation in terms of the Rules. The Authority further said in terms of Article 13.2 of the Agreement on Subsidies and Countervailing Measures of the WTO, the Government of China would be afforded a reasonable opportunity throughout the period of probe to continue consultations with a view to clarifying the factual situation and to arriving at a mutually agreed solution.

In order to cushion the impact of prospective imposition of countervailing duty, the Authority has according to rule, is also providing opportunity to the industrial users of the subject goods and to representatives of consumer bodies who could furnish details relevant to the probe concerning subsidy, injury and causal link.

Mid-term review

Even as a case of anti-subsidy is being initiated, the Authority has also undertaken a mid-term review of anti-dumping duty, already in existence, on the subject goods from China based on a petition separately field by the domestic industry, pleading for review of extant anti-dumping duty. So for the Chinese exporters of sodium nitrite, it is a double whammy, trade policy analysts told Business Line here. They said while anti-dumping and countervailing action is a legitimate riposte to unfair trading practices, “the WTO rules are designed to ensure that such proceedings are conducted fairly with exporters not getting unnecessarily exposed to the time and substantial expense of what would could be a highly prejudicial allegation, prompted by inefficient domestic manufacturers to wring unfair advantages from the authorities”.