ANNEXURE II

Principles for determination of subsidy which has been conferred on a limited number of persons as referred to in Rule 11

1. The designated authority in order to determine as to whether a subsidy has been conferred on a limited number of persons engaged in the manufacture or production of an article, shall take the following principles into consideration :-

(a) whether the granting authority or the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises. However, where the granting authority, or the legislation pursuant to which the granting authority operates, establishes objective criteria or conditions governing the eligibility for, and the amount of, a subsidy, such subsidy shall not be considered to have been conferred on a limited number of persons engaged in the manufacture or production of an article, provided that the eligibility is automatic and such criteria or conditions are strictly adhered to and such criteria and conditions have been clearly spelt out in the law, regulation or other official document of the granting country or territory and are capable of verification.

Explanation : For the purposes of the above para objective criteria or conditions mean criteria or condition which are neutral, which do not favour certain enterprises over others, and which are economic in nature and horizontal in application, such as number of employees or size of enterprises.

(b) Notwithstanding the determination that a subsidy is not being granted to a limited number of enterprises in terms of the provisions contained in para (a) above, if the designated authority has reason to believe that the subsidy has in fact been conferred to a limited number of enterprises, it may consider other factors like (1) use of a subsidy programme by a limited number of certain enterprises or predominant use by certain enterprises (2) granting of disproportionately large amounts of subsidy to certain enterprises and (3) manner in which discretion has been exercised by the granting authority in decision to grant a subsidy, for determination of subsidy. The designated authority, in applying this clause, shall take into account, the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as the length of the time during which the subsidy programme has been in operation.

(c) A subsidy which is limited to certain persons engaged in the manufacture or production of an article located within a designated geographical region within the jurisdiction of the granting authority shall be considered to have been granting to a limited number of persons engaged in the manufacture or production.