Central Idea

India offers a duty-free quota-free (DFQF) scheme to least developed countries (LDCs) under the World Trade Organisation (WTO).
A report by the LDC Group reveals that about 85% of the products offered by India remain unutilised under the DFQF scheme.

World Trade Organisation (WTO)
Establishment	The WTO was established on January 1, 1995, following the Uruguay Round of Negotiations conducted from 1986 to 1994.
Nature	The WTO is the only global international organization dedicated to regulating trade rules between nations.
Successor to GATT	It is the successor to the General Agreement on Tariffs and Trade (GATT), which was in place from 1948 to 1994.
Objectives	To facilitate the smooth, predictable, and unrestricted flow of international trade.
Working Principles	Based on the principles of MFN and national treatment, ensuring equal and non-discriminatory treatment.
Member-Driven Organization	Governed by its member governments, and decisions are made through consensus among these members.
Special and Differential Treatment for Developing Countries	The WTO provides specific flexibilities and rights to least developed countries (LDCs) and developing nations.

DFQF Scheme

The DFQF access for LDCs was initially decided at the WTO Hong Kong Ministerial Meeting in 2005.
India became the first developing country to extend this facility to LDCs in 2008, providing preferential market access on 85% of its total tariff lines.
The scheme was expanded in 2014, offering preferential market access on about 98.2% of India’s tariff lines to LDCs.

(1) Tariff Line Utilisation Data

WTO data from 2020 indicates that 85% of the tariff lines offered by India under the DFQF scheme show zero utilisation rate.
China’s utilisation rate for similar tariff lines is 64%, with only 8% of the lines showing a utilisation rate above 95%.
Utilisation rates for beneficiary LDCs vary significantly, with Guinea and Bangladesh having low rates (8% and 0% respectively), while Benin reports the highest utilisation rate of 98%.

(2) Non-Preferential Tariff Route

Similar to China, significant amounts of LDC exports enter India under the non-preferential (most favoured nation) tariff route, despite being covered by the Indian preference scheme.
The report highlights the importance of preference margins, indicating potential duty savings.
For example, fixed vegetable oil exported from Bangladesh to India has a preference margin of 77.5 percentage points, implying a potential $74 million duty savings if the preference scheme were utilized.

The report suggests that the low utilisation of the preference scheme by LDCs is not due to exporter awareness but rather existing barriers that hinder the effective use of preferences.
The specific barriers preventing LDCs from fully utilizing the scheme are not mentioned in the article.