The UPA government opened its war chest again on Thursday to hand out sops to labour-intensive export sectors like gems & jewellery.
The measures follow up on the 2% cut in excise and services tax announced by the government on Monday. That alone will cost the government about Rs 30,000 crore in revenue foregone. In the interim supplement to Foreign Trade Policy 2004-09, commerce minister Kamal Nath on Thursday announced several measures to boost exports from sectors like leather and textiles, where job loss is spreading fast. In addition, there was a big concession that will allow all exporters to earn tax credits that can be set off against their imports, without waiting for realisation of export proceeds. Known as duty credit scrips under the Duty Entitlement Passbook scheme, this will cut back on the usual waiting period of six months, improving the cash flow for exporters.
?The global financial crisis seeping into real economy has affected our exports as well, even though merchandise and services exports constitute only 21% of our GDP,? Nath said. Exports from tea, rice, marine products, gems & jewellery, cotton yarn, fabrics, handicrafts and carpets have been affected extensively this year, he noted.
The largest sops were reserved for the gems & jewellery sector, where exports contracted by 2.29% in dollar terms during April-January ?09. Overall exports grew by 13.2% in this period. The target for total exports in 2008-09 was revised downwards to $175 billion from $200 billion earlier.
Recognising the impact of job losses on general elections just a month away, Nath said Surat, where over two lakh workers in the gems & jewellery cluster have lost their jobs, has been recognised as a town of export excellence for diamonds. Bhilwara in Rajasthan has been granted the status of a town of export excellence for textiles.
The other benefits for the sector include removal of curbs on import of gems & jewellery as well as on worked corals.
As many as ten new players have been added to the list of nominated agencies for importing precious metals. Authorised personnel of gems & jewellery units in export-oriented units will also be allowed to carry up to 10 kg of gold in their personal capacity, subject to RBI and customs department guidelines.
For leather and textile exports, the minister announced a special package of Rs 325 crore that will start from April 1, 2009. Export incentives have also been provided for technical textiles, stapling machine, handmade carpets and dried vegetables.
The commerce minister was upbeat that Indian exports would touch $200 billion in next fiscal as the three stimulus packages took effect.
The export turnover for Premier Trading Houses was also scaled down to Rs 7,500 crore from the earlier Rs 10,000 crore, because of the global crisis. However, sticking to the course of Constitutional propriety, Nath left other big-ticket measures for the foreign trade policy by his successor, and dealt only with procedural issues, largely to combat the impact of the global slowdown.
The government has extended export obligation for exports during the current fiscal to 2009-10 under the EPCG scheme. It has also extended the export obligation period against advance authorisations up to 36 months.