Ministry moots sector-specific incentives for exporters

Stung by the steep decline in the export from sectors that have less import intensity but greater labour intensity, the Department of Commerce is seeking sector-specific relief measures for them. These sectors include plantation, marine products, garments, fruits and vegetables and handicrafts.

Highly-placed sources in the Government told Business Line here that the earlier relief measures announced in June and September 2007 were able to only partly meet the concerns of exporters reeling under the relentless rise of rupee value vis-a- vis the US dollar in which most of the export receipts are received.

Though measures such as modest increase in Duty Entitlement Pass Book Scheme, interest rate subvention of two percentage points per annum to all scheduled banks in respect of export credit to the specified categories of exporters in the small and medium enterprise sector and service tax exemptions for a few select services were announced, they did not counter the persistent appreciation of the rupee and its adverse impact on the margin of exporters, they said.

The sources revealed that in the case of tea and coffee exports, the decline during the first half of the current fiscal was 33.3 and 20.2 per cent as compared to the corresponding months of 2006-07, 19.4 per cent in the export of fruits and vegetables, 15.4 per cent in cashew exports, 10.5 per cent in marine products, 17.4 per cent in cotton exports, 12.1 per cent in garments and a whopping 56 per cent in handicrafts. They said that in 83 exporting units surveyed by the Department of Commerce the job loss till end-June 2007 was 10,500, which would shoot up to two lakh by end-March, 2008 and eight lakh by September 2008, if no requisite relief measure was forthcoming to arrest the decline in exports and consequent retrenchment of workforce.

The sources said that the Commerce & Industry Minister, Mr Kamal Nath’s June package remained largely unimplemented. The demands of exporters for exemption from service taxes remained unmet and the local levies reimbursement has not been addressed up till now, aggravating the exporters’ woes.

That is why the Commerce Ministry is seeking an across the board one per cent increase in DEPB rates and not like the selective way in which it was done in the last package, pre-shipment and post-shipment credit to be cut down to 6 per cent from the range of 9 to 11 per cent and further measures providing sector-specific succour to the worst hit exporters.

They further said that 100 per cent export-oriented units have not been compensated for rupee appreciation as they also source most of their inputs domestically and together with gem and jewellery segments, which need to be provided some relief, the Commerce Ministry is seeking an extension of income tax exemption under Sec 10-A and 10-B for one more year from 2009 to 2010 for these segments.

The sources clarified that the Finance Minister, Mr P. Chidambaram, would meet only the textile industry representatives on November 15 to sort out the industry’s problems particularly on working capital and technology upgradation fund scheme and not to discuss exporters’ problems in the light of continuing rupee appreciation.