High freight cost hampers engg goods exports

New Delhi, March 23 | Updated: Mar 24 2005, 05:30am hrs
High freight cost and uncertain policy environment are the major problems being faced by engineering goods exporters.

Although, exports are steadily increasing with the sector clocking a 40% growth in the April-October (2004-05) period, industry players say that for sustained growth, the government has to step in to bring down transaction costs.

Interestingly, while it is demand from China which is primarily responsible for the unusually high growth achieved during 2004-05, the stiffest competition being faced by Indian exporters is again from China. China mainly imported iron from us for the construction they have undertaken for the forthcoming Beijing Olympics. They are our biggest competitors in most other categories, said Rakesh Shah, chairman, engineering export promotion council (EEPC).

High freight cost in India is one of the important factors weighing against Indian exporters competing with their Chinese counterparts. While we pay $3,000 for one container whereas the Chinese exporters have to pay just $1,600. How can we compete against them when they have such an advantage over us, pointed out Nipha Exports chairman PK Shah.

According to Mr Shah, since the Shipping Corporation of India cannot prevent cartels being formed by major shipping players, the government should put in place a regulatory authority.

The chairman pointed out that that exports of engineering goods and services, which was expected to touch $13 billion this year, could increase to $22 billion by 2009 if the government provides a facilitating environment.

Talking about the expectations of the sector from the forthcoming foreign trade policy (FTP), Mr Shah said the commerce ministry should only announce schemes which have the approval of the finance ministry. A number of schemes announced in the policy are not notified because of disagreement with the finance ministry. This results in a lot of inconvenience for exporters as they do their calculations on the basis of the schemes announced, he said.

The new scheme to replace the duty entitlement pass book (DEPB) scheme must not only include customs duties but also all types of taxes and duties in lieu of the DEPB scheme, Mr Shah said.