The Hindu Business Line : Rising rupee: Exporters look for further relief

New Delhi, July 17 After the announcement of some relief to exporters reeling under the appreciation of the rupee vis-À-vis US dollar on July 12, the exporting community is hoping more mitigating measures against the blows of exchange-rate induced shocks to its business calculations.

Exporters told Business Line here that though the measures announced by the Finance Ministry on July 12 such as interest rate relief, adjustment of duty drawback rates and swifter reimbursement of past export claims were welcome, t hey meet only half-way of what the Department of Commerce-commissioned report of the Committee’s recommendations. The Committee to assess the impact of rupee appreciation on exports headed by the Additional Secretary in the Commerce Ministry, Mr R. Gopalan, incidentally submitted its report on July 12, 2007 when the Finance Ministry unveiled the package, provoking some exporters to say that the package was pre-arranged without duly factoring in the recommendations of the Commerce Department.

The Committee of the Commerce Ministry, mandated to ensure that exporters do not lose their competitiveness owing to the relentless onslaught of an appreciating rupee, acknowledged that Indian exports were likely to lose their market share to their nearest competitors whose currencies have appreciated at a lower clip than the Indian rupee or have even depreciated with respect to the major convertible currencies.

The exporters say that while the Committee sought enhancement of the Duty Entitlement Passbook and duty drawback rates by 5 per cent for the nine sectors, viz., textiles, readymade garments, , leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys, the actual announced package ranged from 2.5 to 3 per cent. It also suggested that rate of interest on pre and post shipment credit to all exports be cut by around 4 per cent. It said that though this extent of reduction recommended might not be fully consistent with the WTO rules, it would at least provide immediate benefit to the exporting community by reducing their cost of final products for export.

Additional important recommendations of the Committee include mandating the scheduled commercial banks to meet the 15 per cent export credit disbursement target and making Exchange Earners’ Foreign Currency Accounts interest-bearing and interest rate needs to be built-in in line with the interest disbursed on foreign currency non-resident account. It also sought notification of the service tax exemption/refunds for exports announced in the Foreign Trade Policy 2007 without further delay.

The President, FIEO, Mr Ganesh Kumar Gupta, said that the relief of duty drawback announced on July 12 was a sequel to the report submitted by Dr Saumitra Chaudhuri, Member, Prime Minister’s Economic Advisory Council, after he made some spot study about the various taxes such as furnace oil, diesel consumed by exporting units which remained unrebated which were duly factored in the July 12 package without anyway providing additional relief to exporters hit by the appreciating rupee.

He said that the 2 per cent increase in interest subsidy for pre-shipment credit now available for 180 days should be applicable to post-shipment credit which was restricted to 90 days only.

The Vice-President, FIEO, Mr A. Saktivel, felt that some crucial measures such as exemption from service tax/refund and fringe benefit tax had not been duly addressed and he felt that 2 per cent interest subsidy to exporters should be continued beyond December 2007 by way of relief to exporters.

The Commerce Secretary, Mr Gopal K. Pillai, said that the July 12 package had not fully addressed the concerns articulated by exporters and the Commerce Ministry commissioned report has been forwarded to the Prime Minister, Dr Manmohan Singh, and “we do hope for some more relief”. He said that the Committee’s recommendation of 5 per cent increase in drawback rate has not been fully taken care of while interest rate subsidy is linked to prime lending rate of the banks.

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