Commerce min sets up Rs 500-crore contingency fund for exporters

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Aug 30 2010, 06:06am hrs
There could be some good news for exporters who felt the Foreign Trade Policy unveiled last Monday was not enough to compensate for the dwindling merchandise exports to overseas markets. According to a top commerce ministry official, the government has set aside a contingency fund of approximately Rs 400-500 crore that will be doled out to exporters in the beginning of the next calendar year once the sectoral reviews are completed in December.

"We have set aside money just the same way we did last yearit will be given out to exporters in January-March 2011 after we review the exact conditions of the exporters, a senior government source said on conditions of anonymity. He said that the contingency fund has been set aside on the count of rising fears that the worst for the exporters is still not over.

"There is still a lot of uncertainty for the exporterswe are seeing the US experiencing a second round of slowdown and the outlook for the EU is also bleak. In such an environment the government has kept a contingency fund aside, he said.

After a dip of more than 12 months, merchandise exports started showing signs of a turnaround from November 2009 but only to a limited degree. In July this year exports increased 13.2%, the slowest in the first three months of the fiscal year, to $16.24 billion. Sectors like tea exports dipped 25%, handicraft exports 60%, tea 25% and ready-made garments 23%. The WTO has forecast a growth in world trade of 9.5% for the calendar year which very few are hopeful of being met.

In an interview to FE last week commerce minister Anand Sharma had said that the commerce ministry would conduct sectoral reviews in mid-November which would be completed by December. There are still grey areas that we need to address like the engineering sector, textiles, handicrafts and handlooms. These are the sectors where the growth is not strong. These sectors are very important because they employ a large number of people.

Earlier in January-March this year the commerce ministry had doled out a fresh package of export incentives to over 2,000 products under the focus market scheme and market linked focus product scheme. The additional stimulus was meant for those sectors like textiles and gems & jewelry that were still facing job losses due to contracting markets overseas. The total value of the announcements was roughly Rs 500 crore.

The FTP review for 2010-11focussed on labour intensive sectors with incentive package amounting to Rs 1,050 crore. Some of the key policy announcements were the extension of the duty entitlement passbook scheme (DEPB) to June 30, 2011 and export promotion capital goods (EPCG) to March 31, 2012. Sharma said that these scheme extensions were for the last time.

A trade analyst with an industry chamber said, In the current global environment it is prudent for the government to set aside money for exportersthe developed markets are yet to recover fully from the downturn so exporters are bound to be jittery.