Exporters to bear the brunt but easing Re to bring some relief

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New Delhi , June 4: The cascading impact of the increased fuel costs, in transportation and raw materials, will be felt by the export sector next year and the government may have to fix a relatively lower export target (in growth terms) in the coming fiscal, exporters said. However, experts said the weakening of the rupee value against the dollar would help in offsetting some of the losses incurred by them due to hiked fuel costs. Among those who will be hurt by rising fuel prices will be those sectors like marine exports, where the fuel use is significant, and also those with production facilities situated away from ports and airports as they would see an increase in costs.

R K Dhawan, chairman (northern region), Federation of Indian Export Organisations, said “the fuel price hike will hurt exports as it increases transportation costs, be it in running a factory, or transporting to the ports and airports. Already the increase in ATF (aviation turbine fuel) has increased air cargo costs of exports. There will be an overall drop in profits by as much as 10%.”

He said it would be difficult for exporters to achieve this year's ambitious $200 billion target and set a lower growth target for coming fiscal considering the fuel price factor. In the last fiscal, rupee appreciation impacted exports and it had fallen $5 billion short of the $160 billion target. As the exporters have purchased most of the raw materials needed for their inputs for exports this fiscal, the impact would not be much in this fiscal's exports, Dhawan said. But exporters will feel the full impact of increased fuel and transportation costs next year.

K T Chacko, director, Indian Institute of Foreign Trade and former director general of foreign trade, said: “The major impact would be felt by sectors like marine exports, where fuel costs are significant. With the catch near the coast diminishing, they are forced to go deep into the sea and this requires more fuel. Increased fuel intake by their vessels in turn impacts their viability and profitability.”