The upcoming union budget should provide policy and fiscal support for development of global-scale shipping lines that could save $ 40-50 billion annually through freight outflows, Federation of Indian Export Organisations (FIEO) has suggested.
“India’s heavy dependence on foreign shipping lines exposes exporters to high freight costs, supply disruptions, and volatility in global shipping rates. The absence of strong Indian shipping carriers weakens India’s trade resilience and bargaining power,” president of FIEO S C Ralhan said.
Around 91% of India’s export-import cargo is carried by foreign vessels. According to estimates India paid an estimated $ 110 to $ 110 billion in total freight charges to foreign shipping lines and for exports this sum was $ 50-55 billion. The union cabinet has already approved a Rs 69,725 crore package to revitalise the maritime sector – which includes ship building assistance.
FIEO has suggested additional measures including access to long-term finance, viability gap funding, and supportive regulatory measures.
Inverted Duty Correction
In their pre-budget recommendations, the FIEO has also asked for addressing inverted duty structure in sectors like textiles, electronics and leather. Inverted duty structure arises when import duties on inputs are higher than finished goods.’
FIEO pointed out that synthetic yarns and fibres attract higher customs duties than finished fabrics and garments. Similarly, electronic components such as PCBs, connectors, and sub-assemblies face higher duties compared to imported finished electronic products. In the chemical and plastics sector, basic raw chemicals and polymers often attract higher duties than downstream products. The leather and footwear sector also faces higher duties on inputs like components and accessories compared to imported finished footwear.
“Correcting these anomalies by lowering or restructuring duties on raw materials will reduce production costs, ease working capital pressures, encourage domestic manufacturing, and strengthen India’s export competitiveness,” Ralhan said.
Tax Incentives Proposed
The Budget should provide a 200% tax deduction for expenditure incurred on overseas marketing, branding, trade fairs, buyer meets, and promotional activities, particularly benefiting MSME exporters, FIEO said. It has also proposed extending the 15% concessional corporate tax rate for new domestic manufacturing units for at least another five years beyond the earlier cut-off date of 31 March 2024.
The Engineering Export Promotion Council (EEPC) has also called for reducing income tax for all non-corporate manufacturing MSMEs to 25% and release 90% of GST refunds immediately as part of its recommendations for the budget.
At present, non-corporate manufacturing MSMEs pay nearly 33% tax (30% plus surcharge and cess) which creates an 8–9 percentage point disadvantage compared with the corporates, EEPC chairman Pankaj Chadha said.