‘Hike in DEPB rates not the solution to rupee problem’

Kolkata, Oct. 6 Urging exporters to adjust to the scenario of a stronger rupee through adoption of a hedging mechanism (forward contracts) or invoicing in currencies other than the dollar like Euro, the Director General of Foreign Trade (DGFT), Mr R.S. Gujral, said here that a hike in DEPB rates was not the solution to the problem.

He, however, admitted that the exporters were indeed in a difficult situation because of the rupee appreciation vis-À-vis the dollar.

Participating in an interactive session on ‘Post Foreign Trade Policy’, organised jointly by the Engineering Export Promotion Council and the Federation of Indian Export Organisation (FIEO), Eastern Region, Mr Gujral said efforts should be made to ensure that the foreign currency risks are addressed by the international buyer.

In the context of perceived uncompetitiveness of Indian exporters because of a stronger rupee, he said that in the long run, they had to improve technology and reduce the cost of production to emerge more competitive globally.

Assuring them help through dialogues with the Finance Ministry on issues such as easy bank credit and below PLR rates, he said discussions were already on to cut down or eliminate export documentation to reduce transaction costs for exporters.

EPCG scheme

Hinting at some relief with regard to eligibility criteria in the Export Promotion Capital Goods (EPCG) scheme, he ruled out any dilution of value additions norms.

Responding to alleged cartelisation moves by pig iron manufacturers, he told the EEPC to take the matter to the Competition Commission.

On notification of two more Land Customs Stations in West Bengal for DEPB credit, the DGFT said the matter would be taken up with the Finance Ministry soon.

VAT problem

For small and medium West Bengal exporters who are grappling with the problem of delayed VAT refunds (now said to have accumulated to Rs 34 crore), Mr Gujral said DGFT would take up the matter with the Department of Revenue. The Engineering Export Promotion Council has urged the Government to move from refund-based initiatives to an exemption-based system.

Export target

Earlier, in his welcome address, Mr S.K. Jain, chairman of FIEO, ER, said the target set by the Government of $160-billion exports during 2007-08, and $200 billion in 2008-09 was rather optimistic, particularly in the backdrop of a rising rupee and slowing global economic growth.

He listed infrastructure development, logistics support and rising transaction costs as three important issues which need to be tackled upfront if exports from eastern region have to pick up in a big way.

Commenting on the rupee issue, he said: “we have reached a stage when we have stopped entering into new contracts.”

Relying on secondary data on various sectors, Mr Jain said export realisations on account of rupee appreciation had fallen by 12 per cent for chemicals, 6 to 6.5 per cent for textiles and likely to dip by 20-25 per cent for processed foods and agro products, electronics & electricals and steel products.