Tax relief for job-creating exporters on cards

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: A Rs 2,000-crore relief package for the export sector, a Rs 15,000-crore additional budgetary support for the infrastructure sector and a special line of credit for non-banking finance companies, housing and auto sectors as well as a cut in the interest rates at which banks buy and sell cash to the Reserve Bank of India—repo and reverse repo—are likely to be the highlight of the economic stimulus package that will be announced next week by Prime Minister Manmohan Singh.

As part of its relief package for exporters as well as to help the expansion and modernisation plans of exporter firms, the Centre may give them tax exemption from their export profits. But the benefits would be on the condition that the companies would use the setoffs to buy machinery and generate employment.

There would also be excise duty cuts on several items intended to directly benefit the auto sector, which is severely hurt by the global financial crisis.

Sources said taking into account the easing of inflationary pressures and also the liquidity crunch, RBI is likely to announce the reduction of its benchmark rates—the reverse repo and repo—during this weekend. But the source said it is doubtful whether the bank would reduce the cash reserve ratio.

The government is also considering a proposal by the Planning Commission for a

Rs 50,000-crore refinance facility, through the India Infrastructure Finance Company Ltd, for funding infrastructure projects. However, there are going to be more high-level discussions on fine-tuning the mechanism for increased availability of credit to the infrastructure sector.

A committee of secretaries, chaired by cabinet secretary KM Chandrasekhar, met on Wednesday to discuss the proposals before it. Commerce ministry officials, including the director general of foreign trade RS Gujral, were present during the meeting to finalise an export package for the export sector.

Taking note of the global financial turmoil and the demand slowdown in the West as well as the fact that shipments have shrunk by over 12% in October for the first time in over three years, the government would also revise its export target to $175 billon from the previous $200 billion.

In this regard the government has taken up a labour ministry proposal, according to which any benefit given to exporters should be linked to mandatory employment generation.