The dispute settlement panel of WTO, in its ruling on December 11, 1998, had endorsed the US position that import restrictions by India on more than 2700 items relating to agriculture, textiles and industrial products on balance of payment grounds were unmaintainable. The panel, however, suggested granting a "reasonable period" that could exceed fifteen months for doing away with QRs.

"The whole question now is about the time frame for removing the QRs as India has already agreed to a six-year phase-out period beginning April 1, 1997, with other WTO members (European Community, Canada, Australia, New Zealand, Switzerland and Japan)," commerce ministry sources said.

However, if the appellate body upholds the panel ruling and its recommendations are adopted by thedispute settlement body, India would need to advance the phase-out period for all member countries as per the most-favoured nation (MFN) principle of the WTO.

A team of lawyers led by Krishnan Venugopal would fight India's case in the appellate body, which has to submit its report to the dispute settlement body within a period of 60 to 90 days for adoption, the sources said.India had made its submissions on the issue with the WTO on June 21 while the US made its submissions on June 4. Additional solicitor general Kirit Raval was likely to assist Venugopal in the fighting the case as solicitor general Soli Sorabjee was preoccupied, sources indicated.

Meanwhile, in an interesting twist, commerce ministry officials perceive the US move asking India for consultations over India's auto policy as just a cover in case it loses out on the QR issue.

Since both the QR issue and the auto policy, which compelled foreign car makers to localise their components and neutralise foreign exchange if they wanted to importany material, fall under the balance of payment (BOP) category, the two cases are related, the officials explained.

Any setback on the QR issue is likely to have an impact on the auto policy also and the country could be forced to review its policy, the sources said. The officials also said that removing QRs would not be a problem as only 667 items remained in the restrictive list now compared to 2714 tariff lines maintained by India when the United States dragged New Delhi to WTO.