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.

Fieo submits new Budget wish-list in face of rising exports

Worried that the Union government may unwind the stimulus measures granted to the export sector in the wake of rising foreign trade, the Federation of Indian Export Organisations (Fieo) Director-General, Mr Ajay Sahai, has submitted a fresh Budget wish-list for the Finance Ministry's consideration. Some of the major points are:

• A turnover tax on exports in place of income-tax. The turnover tax will simplify the tax procedure and reduce the administrative burden on exporters. This tax can be collected at 0.25 per cent on all remittances received from abroad, thus plugging any leakage and reducing the cost of collection.
• Investment-linked incentives for micro, small and medium enterprises (MSMEs) in the export sector. To increase investment in manufacturing, MSME export sectors be given tax concession on investment in capital and machinery.
• Extension of tax holiday by three years for export-oriented units and units in software technology parks.
• Exemption from service tax on all output services for exports.
• Service tax exemption to all export promotion councils.
• The rate of depreciation on old machinery should be increased from 15 per cent to 25 per cent to encourage purchase of new machinery.
• Credit for exporters at a flat rate of six per cent.
• Extension of interest subsidy scheme till March 31, 2013, in case providing export credit at 6 per cent is not feasible.
• Foreign currency credit at the earlier rate of LIBOR plus 100 basis points. (Following the financial crisis, this rate was increased to LIBOR plus 350 basis points).
• Rectification of inverted duties structure in silk and synthetic fibre.

Notification for cash rebate of accumulated Cenvat credit on account of reduction in excise duty.

Exports to US on upward swing

There has been no impact of the US' economic downturn on exports. Data
released by the US Department of Commerce shows that exports during
January-October 2010 had touched $25
billion, the same as in the 10-month period of 2008.

In 2009, exports of goods and services were worth $21 billion ($17
billion in the first 10 months).
Textiles and apparel did well, exports of which touched $2.7 billion,
an increase of 20 per cent, according to Mr Vijay Mathur, Deputy
Secretary-General, Apparel Export Promotion Council (AEPC).

However, exports to other countries declined, including Europe.

Handicrafts exports up by 48 % in November

Handicrafts exports grew by a robust 48 per cent year-on-year to fetch
$66 million in November 2010, following increasing demand from the US
and European Union markets.
According to data provided by the Export Promotion Council for
Handicrafts (EPCH),
handicrafts exports stood at $44.81 million in November 2009.

Among the items which saw maximum export growth were imitation
jewellery (up by 79.85 per cent), woodware (up by 78.05 per cent) and
shawls as artware (up by 51.94 per cent), the EPCH Executive Director,
Mr Rakesh Kumar, said : Following the increased demand, the Union
government revised the exports target upwards to $2.5 billion from
$2.2 billion for the current fiscal.

According to EPCH, during April-November 2010, exports went up by 25
per cent to $1.13 billion from $912 million in the corresponding
period of 2009-10.

The US and the European Union together account for 70 per cent of the
handicrafts exports.

Tea exports dip by 26 % in November.

Tea exports fell by 26 per cent to 15.4 million kg in November 2010,
according to the Tea Board. The total shipments during the
corresponding month of 2009 was 20.74 million kg.
In terms of value, exports earned Rs 216.7 crore during November,
compared to Rs 304.6 crore in November 2009, the Board said.

During January-November 2010, tea exports remained almost stable at
178.5 million kg, as against 178.4 million kg in the same period of
2009.

However, in terms of value, the shipments registered a decline of 5.2
per cent to yield Rs 2,379.4 crore in the first 11 months of 2010, as
against Rs 2,511.1 crore during the corresponding period of 2009.