Sharma to pitch for interest relief to exporters

IN order to make cheaper funds available, the Commerce Department will soon put in a request to the Finance Ministry to reintroduce interest rate subvention or discount scheme for certain category of exporters.

A Commerce Department official stressed that cost of funds should come down for exporters in order to encourage them to make investments, produce more and stay competitive.

The Commerce Minister, Mr Anand Sharma, may take up the matter with the Finance Minister, Mr Pranab Mukherjee, later this month. It may be recalled that the government gave a 2 per cent discount to eight export sectors two years ago to help them compete better after demand plunged in the developed world due to the financial crisis. The scheme lapsed in the closing stages of the last fiscal when exports grew by an inpressive 37.6 per cent.

Industry sources say that this rapid pace may not be possible to sustain owing to the rising cost of credit.

According to Fieo chief, Mr Ramu S. Deora, the cost of funds for exporters has increased by more than half over the last one year, affecting competitiveness, while interest rate on export credit climbed to 10.75 per cent from 9 per cent in April 2010.

He says that if one takes into account the two per cent subvention given by the government till March 31, the net increase in the cost of funds over a period of 13 months for exporters works out to 53.6 per cent.

Mr K.T. Chacko, Director, Indian Institute of Foreign Trade, points out that exporters in China and other significant developing countries have access to credit at much lower rates than in India.

The facility of interest subvention was available to sectors like handicrafts, carpets, handlooms, small and medium enterprises, leather, jute manufacturing, engineering goods and textiles. Under the scheme, banks would pass on the subvention to exporters and later claim the same from the Centre.

However, taking into account the country's strong growth at present, the Finance Ministry is not too keen on doling out export sops.