1. Centre mulling Rs 5,000-crore boost to push exports

Centre mulling Rs 5,000-crore boost to push exports

With merchandise exports shrinking for the eighth consecutive month in July, the government is looking to provide an additional Rs 5,000 crore towards covering more sectors and markets under the reward programme

By: | New Delhi | Updated: August 22, 2015 11:45 AM
exports

With merchandise exports shrinking for the eighth consecutive month in July, the government is looking to provide an additional Rs 5,000 crore towards covering more sectors and markets under the reward programme. (Reuters)

With merchandise exports shrinking for the eighth consecutive month in July, the government is looking to provide an additional Rs 5,000 crore towards covering more sectors and markets under the reward programme, the Merchandise Exports From India Scheme (MEIS), reports Arun S in New Delhi.

Also, the government could expand the scope of this 3% interest subsidy scheme for exporters by extending it to more sectors. According to commerce ministry sources, sectors such as chemicals, pharma and electronics, which are excluded from the scheme, would be brought under the purview of the scheme, for which R1,650 crore was allocated in the FY16 Budget. They added that items which are now excluded in sectors such as engineering and textiles as well as merchant exporters could be given the benefit of interest subvention.Though the rates of duty credit scrips issued under MEIS (currently ranging from 2% to 5%) may not be tinkered with, the ministry is considering including more items under different sectors and matching them to new markets in Latin America, Africa and Asia. This is also with an aim to further boost the ‘Make In India’ initiative.

The sources said the finance ministry has agreed in principle to provide additional funds to support the exports sector through a package. The benefits under the foreign trade policy (FTP) given this fiscal, if fully utilised by exporters, is expected to result in a revenue outgo of around Rs 15,000 crore, although the incremental exports to be achieved as a result could offset this.

Though the government had committed only to a mid-term review of the FTP 2015-20 — which would have been in September-October 2017 as the new FTP came into effect this April — the prevailing exceptional circumstances has warranted a re-look.

“Cost of credit has assumed greater significance as the cycle of exports from the shipment till realisation of exports proceeds has enlarged with liquidity problems globally. In many cases, buyers are placing orders with clear understanding that payment will be made only after selling the goods. Exporters have to therefore take credit for longer periods and interest differential (which India has with other competing countries) blunts your competitive edge”, said Ajay Sahai, DG & CEO of the Federation of Indian Export Organisations. Rate of export credit in India is 11-12% compared with 5.5% in China, 6.2% in Malaysia, 4.6% in Thailand, 2.6% in Taiwan and 2-3% in the euro area (except Greece).

Some sectors (poultry meat, sesame oil and soya protein) have demanded that they be included in the MEIS. Others (tobacco, cashew nuts, chemicals such as PVC, polyester chips, jute, carpets, silk, footwear, coffee, black pepper, chilli powder and lac products) whose duty scrip rates were reduced/withdrawn in this FTP have sought restoration of the duty benefit. Some other sectors (engineering goods, some machinery, bulk drugs/APIs, siddha medicines, leather items, ready made garments, sports goods, rayons, spirits, groundnut and forest produce) want to be included in MEIS and/or the coverage of the duty benefits expanded for exports to more countries.

The fall in India’s exports have been attributed to slowdown in overseas markets, lower crude oil prices (with petroleum products being a major export item for India, the fall in oil prices have resulted in lower value realisation), and the depreciation of the euro. Besides, the fall in prices of commodities such as farm products and metals (gold, copper, etc) have also adversely impacted India’s exports.

Adding to these factors is the recent move by China to devalue the yuan by around 3.5%. Exporters had said the yuan devaluation will affect the realisation of Indian companies’ exports to China, besides enhancing the competitiveness of Chinese items when compared to Indian products such as gems and jewellery, man-made fibres, garments, steel and organic chemicals in overseas markets.

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