Govt softens COVID-19 blow on exporters: Trade policy sops to stay till FY21 end

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Published: April 1, 2020 2:50:20 AM

The move is aimed at softening the blow to exporters already grappling with a massive cancellation of orders in the wake of the Covid-19 pandemic, a senior official told FE.

However, a decision on extending the Services Exports Promotion Scheme is yet to be made, the ministry said. (Representative image)However, a decision on extending the Services Exports Promotion Scheme is yet to be made, the ministry said. (Representative image)

The commerce ministry on Tuesday extended the validity of the current foreign trade policy (FTP) for 2015-20 by another year to FY21 end. The move is aimed at softening the blow to exporters already grappling with a massive cancellation of orders in the wake of the COVID-19 pandemic, a senior official told FE.

The extension will enable exporters to continue to get incentives under existing programmes — including the Merchandise Exports From India Scheme (MEIS), interest equalisation scheme and transport subsidy scheme (for farm exports) — for one more year. However, a decision on extending the Services Exports Promotion Scheme is yet to be made, the ministry said.

The pandemic has also forced the government to review its FTP architecture for the next five years, given the country now needs fresh policy responses to counter the damaging impact on both internal and external trade even after it recedes.

The decision to extend FTP validity comes after commerce and industry minister Piyush Goyal held a meeting via video conference, the second time since March 27, with various export bodies to address issues faced by them. Already, exporters that FE spoke to say roughly over a quarter of their orders have been cancelled for reasons, including their inability to source supplies due to a lockdown and the buyers’ reluctance to get delivery at a later date.

Exporters had received benefits worth Rs 40,000 crore under the MEIS in FY19. Simialrly, under the interest equalisation scheme, they are estimated to have received Rs 2,868 crore in FY20. This scheme usually allows manufacturing and merchant exporters an interest subsidy of 3% on pre-and-post-shipment rupee credit for exports of 416 products (tariff lines).

Exporters have already warned of a crash in outbound shipments in FY21, as global supply chain has been hit hard, cargo movement has been affected, shipping lines altered and warehouse capacity stretched following the Covid-19 outbreak. Up to February this fiscal, overall goods exports contracted by 1.5% year-on-year to $293 billion. Analysts now say goods exports this fiscal may drop to $315 billion or less, against $330 billion in the previous year.

After his meeting with Goyal, Federation of Indian Export Organisation president Sharad Kumar Saraf said the authorities should bear half the wage cost of labourers from funds available with the Employees’ State Insurance Corporation (ESIC) or Employee Provident Fund Organisation to ease the burden on exporters. He suggested that the government allow manufacturing companies engaged in exports to operate with at least half the manpower despite lockdown, after adhering to safety and social distancing norms. Police and other authorities at the local level must be sensitised to ensure logistics-related issues are sorted out expeditiously, he added.

Ravi Sehgal, chairman of the engineering exporters’ body EEPC, said, on an average, 25-30% of export orders have been cancelled in recent weeks and ‘freight forwarding’ rates have jumped 3-4 times in recent weeks. He suggested that the remittance period be extended for exporters from 9 months to 15 months.

Indian Oilseeds and Produce Export Promotion Council chairman Khuswant Jain said exporters are unable to physically courier LC (letter of credit) documents lodged with Indian banks to LC issuing overseas bank due to the suspension of such courier services. This is obstructing the exports. “In many cases, the cargo is loaded but shipment is not taking place due to the absence of certain documentation.”

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