The word subsidy is derived from the Latin word “subsidium”, which meant “support, assistance, aid, help, and protection”. A subsidy is a form of financial aid or support extended to industrial sectors to encourage suppliers to increase the output of a particular product by partially offsetting the production costs or losses. The objective of subsidies is to expand production of a particular product, or creation of new enterprises, industries and development of particular regional area.

As per WTO ASCM rules and Indian Rules the concepts of subsidy, eligibility and specificity are defined and explained. In that, how member countries are bound to follow the principals of ASCM under Part 1 of the SCM agreement? Wherein “Article 1 of ASCM defines subsidy means (i) a financial contribution (ii) by a government or any public body within the territory of a Member (iii) which confers a benefit”.

Subsidies can be identify on the face of the various legal notifications, circulars, rules and regulations, official documents and industrial catalogues by the granting authorities which are specifically provided to an enterprise or industry or group of enterprises or industries. As per part V of SCM agreement provides substantial and procedural rules for imposition of countervailing duties. On failure to follow the said rules such investigations are subject to dispute settlement under WTO

The concept of “financial contribution” means it must be made by or at the discretion of  “government or a public body” such as (central, state, local and municipal governments) in form of providing grants, loans, equity infusions, loan guarantees, and fiscal incentives, provision of goods and services. Enterprises which are benefited thereby distort the trade of domestic industry market then they are actionable as per ASCM.

Specificity means benefit conferred are restricted to certain or limited enterprises or industries or region specific. It plays a vital role in deciding whether subsidy is actionable or non‐actionable.

The said concept is used as a trade remedial measures under ASCM if the domestic industry is suffered injury by way of imports from the subject countries then they can avail the remedy under procedural rules laid down as per the rules and ASCM agreement. Domestic industry has to prove that exporters are benefited from the subsidies that are there by they are eligible for the said benefit which have been provided by the government or public bodies of the subject country. Once the authority investigate the same on the allegations made by the Domestic industry if they are satisfied then that particular authority imposes Countervailing duty for a period of 5 years.

About Author:
P.SreeLakshmi , Legal Associate
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