Exporters may get back benefits available earlier

The big export relief measures for which the besieged exporters are looking forward to on Saturday would largely comprise restoration of benefits already bestowed on exporters that were withdrawn in recent period such as interest subvention, due payment of arrears of terminal excise duty (TED)/Central Sales Tax (CST), services tax and higher drawback and DEPB (duty entitlement pass book) rates.

Highly-placed sources said that the export relief measures to be announced tomorrow would broadly cover these aspects so that exporters, reeling under disconcerting drop in overseas orders and high transaction cost, would be left with some flow of funds to salvage the situation.

They said that not a single service tax to exporters has been refunded by way of notification so far even though the intent has been declared widely.
Policy rates

The sources said that as the RBI is all set to announce on Saturday some cuts in policy rates with banks being asked to push down interest cost, exporters must perforce also to hold on to existing markets for which they need “a little bit of stimulus”. The sources said that once a lower policy rate is unveiled by the central bank to be followed by lower interest rate by banks, exporters would also be given an interest subvention on export finance, especially those in the labour-intensive export segment such as textiles, gems and jewellery, marine products, leather of minus 2 per cent that would cost Rs 250 crore in the next four months.

The restoration of drawback and DEPB rates from the recent cuts would cost another Rs 250 crore in the next couple of months, while there would be refund of services tax on output services and foreign exchange commission to benefit the exporters.

They said the arrears of TED/CST running to Rs 600 crore would be settled now, while the Export Credit Guarantee Corporation (ECGC) would be given a backup of Rs 350 crore to extend risk coverage to exporters. The sources said that the Commerce Ministry is worried that Indian exporters have to contend with every other country providing at least one per cent tax rebate to get export orders in a shrinking market and the least the government could do is to help them realise some of the benefits guaranteed to them under the statute.
Ministry perspective

Asked how the Commerce Ministry views the prospects for exports after the relief measures would be put in place tomorrow, the sources conceded that the department has drawn two scenarios—the most optimistic being that overall exports during the current fiscal would register a 10 per cent growth in dollar terms and the least optimistic being that there would be a decline of 4 per cent in export growth of $162 billion the country compassed during 2007-08. They said the exporters have orders only up to January next and the subsequent months would be difficult to sail through.

The sources said that a survey of 121 companies across the country and across industry revealed that job losses estimated was 65,000 in the last three m months and the prediction is that the aggregate job losses in industry due to declining exports and declining demand would be 12 lakh this year.

The sources said that even the Special Economic Zones (SEZs) have been facing difficulty in exports and in places like electronic SEZ at Santa Cruz, the zone authority has informed the officials in the Commerce Ministry that 25,000 less number of casual employees passes do not get picked up. “This is at a time when casualisation and contractualisation of labour has been the most important labour reform imperceptibly supervening in India between 1991 and 2008”, the sources quipped.

To a specific query about any move to diversify markets for exporters, the sources said that India’s exports to the United States and the European Union (EU) account for only 35 to 38 per cent with the remainder going to Africa, East Asia and Latin American countries. “That is why the Ministry has sought higher assistance for focus market and focus market schemes to help exporters send out delegation and mount trade fairs for buyer-seller interface,” the sources added.