Exporters disappointed over duty drawback reduction New Delhi, Aug. 30 Exporters by and large have voiced concerns over the revised all-industry draw

New Delhi, Aug. 30 Exporters by and large have voiced concerns over the revised all-industry drawback rates for 2008-09 announced by the Finance Ministry on Friday, stating that the general reduction in duty rates was a disappointment as it came at a time of weak external demand and also when the export credit subvention scheme was set to be withdrawn by the Government.

“The new rates have come at a time when most export industries are in bad shape. The reduction in drawback rates will adversely impact sectors like textiles,” Mr Ganesh Kumar Gupta, President of Federation of Indian Export Organisations (FIEO), told Business Line.

He said FIEO expected the Finance Ministry to pay heed to the submissions of various economic ministries like commerce and textiles to continue with existing drawback rates for some more months rather than bringing about changes in such rates. Mr Gupta said there has been a general reduction in drawback rates in most of the items.

General reduction

The sectors where there have been a general reduction in drawback rates include textiles and textile articles, leather and leather articles, metals and articles of metals and bicycle and bicycle parts.

Drawback rates of polymers (HDPE, LDPE and polypropylene), linear alkyl benzene (LAB) and purified terephthalic acid (PTA) have been reduced.

The rates have been increased from 7.6 per cent to 9 per cent and 6.5 per cent to 7.6 per cent on flax yarn and flax fabric respectively.

In textiles and textile articles, the Finance Ministry had reduced the drawback rate for higher quality silk fabrics from 10.8 per cent with a drawback cap of Rs 325 a kg to 9.8 per cent with a drawback cap of Rs 295 a kg.

The rate for fabrics of noil silk has also been revised downwards.

In the case of wool tops, woollen yarn and fabrics, the drawback rates have been decreased by about 18 per cent to 21 per cent.

The caps have also been revised downwards.

For grey cotton yarn, the new rate has been pegged at four per cent irrespective of the counts of the yarn.

cotton yarn

In the case of cotton yarn (dyed), the drawback rate is five per cent irrespective of the counts of the yarn, against six per cent (grey)/7.1 per cent (dyed) earlier. For cotton yarn of 60 counts and more, the earlier rate was 9.5 per cent (grey)/10.6 per cent (dyed).

As for cotton fabrics, the new rate is 4.6 per cent (grey)/5.5 per cent (dyed) with a drawback cap of Rs 14 a kg (grey)/ Rs 20 a kg (dyed). In the case of denim fabrics, the new rate is 5.7 per cent with a cap of Rs 21.5 a kg as against the earlier rate of 8.5 per cent with a cap of Rs 32 a kg.

In the case of synthetic/artificial filament yarn, only customs component of drawback rates has been prescribed.

The drawback rate for Synthetic Filament Yarn now is 2.2 per cent (grey)/2.6 per cent (dyed) and for artificial filament yarn 2.1 per cent (grey)/2.5 per cent (dyed) as against the earlier rate of 3 per cent (grey)/3.5 per cent (dyed) for both types of filament yarn.

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New duty drawback rates effective from Monday

NEW DELHI: The finance ministry on Friday revised duty drawback rates, effecting an across-the-board reduction in line with the duty changes made this year. The changes are based on the recommendations of a committee set up by the finance ministry to study drawback rates.

Duty drawback rates seek to neutralise the incidence of Customs duty, central excise duty and service tax borne by an exported article. The revised rates would come into effect from September 2008, the Central Board of Excise and Customs said in a statement.

The decrease is largely in the case of petrochemicals due to phasing out of import duty on crude oil. The peak rate of aggregate import duties in 2008-09 has come down to 31.7% as compared to 34.13% in the previous year. Customs duty on major raw materials such as crude oil, raw cotton, zinc and Ferro alloys has been eliminated. The excise duty has been reduced across the board from 16% to 14%.

Drawback rates have been increased for some items like flax yarn, which will now be eligible for 9.6% duty from 7.5% earlier. The rate for optical fibre has been increased to 1.2% from 1% earlier. Wooden artwork too would also attract higher drawback rate.

In most cases, the net realisation for exporters would remain unchanged since the finance ministry has pegged the rupee higher against the dollar as compared to last year. The rupee was pegged at 39 to a dollar last fiscal as against 43 in the current revision.

Finance ministry had set up a panel under Prime Minister’s Economic Advisory Council member Saumitra Chaudhuri to determine the rates.

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Anti-dumping duty review on sun film imports

The Commerce Ministry has initiated sunset review of the anti-dumping duty imposed since 2003 on imported sun/dust control polyester film from Taiwan and United Arab Emirates (UAE).

Commonly called speciality polyester film, the sun/dust control polyester film is used in glass windows to reduce solar heat glare, ultraviolet light and other glare. It also provides increased shatter resistance.

In a notification, the Directorate General of Anti-dumping and allied duties in the Department of Commerce said the present investigation is a review as the Authority recommended a definitive dumping duty on the subject goods as the difference between $7.99 a kg and the landed value of imports from Taiwan (Chinese Taipei) and the difference between $8.17 a kg and the landed value of imports from UAE in 2004.

The rules require the Authority to review from time to time the need for continued imposition of the anti-dumping duty. The Authority is also required, on the basis of a duly substantial plea by or on behalf of domestic industry, to undertake a review to determine whether the expiry of duty is likely to lead to recurrence of dumping and injury.

Accordingly, the applicant for the original dumping probe — Garware Polyesters Ltd, Mumbai — has filed an application with the Authority, seeking a review probe for continuation of anti-dumping duty on the subject goods originating or exported from Taiwan and UAE for a further span of five years.

On the state of the industry, the applicant claims that even though the performance of the domestic industry has improved, the situation continues to be ‘fragile’ and ‘injury’ to the domestic industry is likely to intensify in the event of revocation of anti-dumping duties.

The Authority said the period of probe for the present review is from April 1, 2007 to March 31, 2008 and the period for injury examination would include the period of investigation (POI) and three years prior to it, i.e., April 2004-March 2005, April 2005-March 2006 and April 2006-March 2007.

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Slump in Chinese textile market brightens prospects for India

After a tough phase, there seems to be signs of hope for the rupee-scarred Indian textile industry. This time, it is the slump in Chinese textiles that has brought some reason to cheer. Besides, neighbouring competing countries are also facing problems, brightening the prospects for Indian textiles.

Mr P. Sundar Rajan, Managing Director, SP Apparels, says: “In India’s case, this is true for the next two decades at least. Western buyers are now seriously looking at India. We have been getting enquiries from hitherto unexplored markets such as Hong Kong, Singapore and African nations.”

SP Apparels is the No. 2 exporting house in the country and owns brands such as Crocodile, Natalia and Crocokids.

Tirupur’s Royal Classic Group, which owns the brand Classic Polo, has already set up its marketing offices in Singapore and Malaysia sensing this opportunity.

Dragon in distress

Appreciation of the Chinese yuan, shrinking raw material (cotton) base and rising labour wages (30 per cent higher than that of India) are posing a serious threat to the Chinese textile industry.

These, in turn, have come as a blessing in disguise for the Indian textile industry that is now hopeful of emerging as a major exporter once again, overcoming one of its worst phases.

In January, the annual appreciation of the rupee was over 11 per cent, while the Chinese currency appreciated by 6.96 per cent. But when the rupee’s average appreciation dropped to 8.36 per cent in March, the yuan was up 8.52 per cent.

According to data available with the General Administration of Customs of China, textile and garment exports in the first half of this year fell 11 per cent year-on-year. Textile and clothing exports totalled $81.68 billion, the data showed. The customs report revealed that apparel export growth slowed to 3.4 per cent.

The country has registered a negative 2.57 per cent growth in exports to the US in January-February 2008. China is witnessing negative growth in the US for the first time in over a decade, industry sources said.

According to a recent survey by the China Cotton Textile Association across 17 provinces, nearly half of the textile companies surveyed wanted to quit and venture into other businesses and nearly 45 per cent have shifted their focus on the home turf.

Signs of sunrise

According to figures available with the US-based Office of Textiles & Apparel, during the first half of the calendar year, China posted a negative 2.43 per cent growth ($13,834 million) in textile and apparel exports to the US, while India registered a 1.89 per cent growth ($2,742.291 million).

Apart from China, the recessionary trend is also being faced in neighbouring competitors Sri Lanka and Bangladesh.

Hit by an economic downturn, Sri Lankan textile units are on a staff downsizing mood, while labour unrests owing to low wages and rising food prices plague Bangladesh’s textile sector.

‘cautious approach’

“China’s pain is India’s gain. It’s true that we have ample opportunity but we have to consider the spiralling raw material costs, rising cost of production and insufficient power problems here.

Most of the companies are not able to pass it on to the overseas buyers and we should have a cautious approach,” said Mr D.K. Nair, Chairman, Confederation of Indian Textile Industry (CITI).

On the raw material front, prices of cotton are on the decline for the past 3-4 days and industry sources expect it to slide further in the coming days, much to the relief of the textile sector.

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Exporters may have to settle for lower duty drawback rates

Exporters may have to settle for lower all-industry duty drawback rates for 2008-09 when the new rates are announced in the coming week.

The Government appointed three-member committee for formulating the duty drawback rates is understood to have recommended “generally lower rates” for 2008-09 than those suggested for the previous year.

The committee, headed by Dr Saumitra Chaudhuri, Member of the Prime Minister’s Economic Advisory Council, had recently submitted its report to the Finance Minister, Mr P. Chidambaram. Almost 90 per cent of exporters rely on the all-industry drawback rates.

Sources said that the significant reduction in customs and excise duties on many raw materials in Budget 2008-09 and also in the following months has led to lower recommended rates, especially for the downstream finished products. Rupee movements have had very little bearing on the recommended rates.

Meanwhile, Dr Chaudhuri told Business Line that the committee had taken the “most recent prices” (April-June 2008) of the input materials for arriving at the recommended duty drawback rates.

Interestingly, the committee has, for its recommendations, not limited itself to only the duty changes made in Budget 2008-09, but has also factored in the major duty rejig made by the Government in June 2008 on crude oil, petrol and diesel and also the removal of customs duty on raw cotton in July 2008.

Factoring in the duty changes in crude oil and other petroleum products has impacted the drawback rates of downstream finished products in the petrochemical industry, leading to lower recommended drawback rates for various products including plastics and manmade fibres, sources said.

In the first week of June 2008, the Government had removed customs duty on crude oil and also cut by 5 per cent the customs duty on petrol and diesel to 2.5 per cent. The customs duty on aviation turbine fuel (ATF) was also reduced. Besides, excise duty on petrol and diesel was cut by Re 1 a litre to Rs 13.35 and to Rs 3.60, respectively.

Taking into account the customs duty abolition on raw cotton has led to lower recommended duty drawback rates on certain finished garments.

The all-industry duty drawback rates are worked out by considering the consumption of input materials and the incidence of duties on these input materials.

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China's loss can be India's gain in textile market

BANGALORE: A fall in the export of textile and apparel from China to the United States during January-June, even as the value of India’s shipments remained unchanged, is sparking hopes of a shift in US orders from the world’s most populous nation to this country.

India, Vietnam, Cambodia and Bangladesh are among the few countries whose exports of textile and apparel to the US rose during the first six months of 2008 while the world’s biggest economy goes through a downturn.

However, China, Pakistan, Sri Lanka and Turkey have seen a slowdown in off-take from their US suppliers amid a drop in the value of the country’s textile and apparel imports.

“One can see some shift in orders from China to other countries, notably Bangladesh and India. We can possibly look at an additional $1 billion of exports happening out of India,” Rajan Hinduja, the MD of Bangalore-based Gokaldas Exports said. US importers are aggressively looking at alternate sourcing locations and India is high on the buyers’ list, he observed.

Official US statistics show that the country imported textiles and apparel worth $24.37 billion during Jan-June 2008, a 5.1% drop compared to $25.7 billion in the corresponding year-ago period. From 2004 to 2007, the country’s imports rose from $ 46.93 billion to $ 53.12 billion.

India’s exports to the US in the first six months this year remained barely changed at $1.42 billion from $1.41 billion while Vietnam’s grew to $824 million from $668 million. Bangladesh’s shipments went up to $832 million from $811 million.

The value of Chinese textile exports, on the other hand, fell from $9.7 billion to $ 9.5 billion, while Pakistan was down to $1.42 billion ($1.68 billion) and Sri Lanka $ 201 million ($ 245 million). Turkey clocked exports of $264 million from $313 million in the first six months of 2007.

Admitting that even while the US economic slowdown was hurting Indian exporters, Mr Hinduja said prospects were brighter for the months ahead, “If you look at the order flow happening for the spring/summer-2009 season, there’s still room for hope.”

Daljeet Singh Kohli, head of the private client group at Emkay Global Financial Services, was of the view that global buyers are looking at the cheapest-cost producer. “Indian exporters need to look at moving up the value chain and ensuring better realisations at a time when currency movement would be highly unpredictable,” he said.

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Duty-free export of steel items may get govt nod

NEW DELHI: The government plans to allow duty-free exports of steel products that are manufactured using imported inputs. The finance ministry has finalised a new scheme for the steel sector under which the export duty on value-added steel products would be withdrawn to the extent of imported raw material used in it.

The benefit would be applicable only for companies using advance licensing scheme (ALS) to avail duty-free imports of capital goods and other inputs. “The new scheme has been finalised by the department of revenue on the advise of the Committee of Secretaries (CoS) reviewing prices of essential commodities. The CoS would now examine the scheme at its next meeting before operationalising it,” an official source said.

The department of revenue has finalised the scheme only for flat steel products (hot and cold-rolled coils) and has suggested that it be operationalised when duty is re-imposed on flat steel products. Sources, however, said that the government may take a larger view of the entire issue and implement the scheme even for steel products that currently attract export duty. Earlier, the steel ministry also suggested exemption for all steel exports that used imported inputs.

While the government withdrew 5-15% export duty on flat steel products and galvanised steel, it has maintained 15% duty on long steel products (used in housing and construction activities), pig iron, sponge iron and semis like blooms, billets, plates and bars. Export duty is levied on these products even if uses imported inputs under the ALS scheme.
Under the new scheme, duty exemption would be extended only after the steel exporter/manufacturer gives an undertaking that the goods to be exported has been manufactured only from material imported under the ALS scheme. The ALS facilitates duty free imports of inputs and capital foods on a specified export obligation.

Companies would also have to maintain separate account for receipt and issue or utilisation of raw material for manufacture of steel products meant for exports. The commerce ministry would prescribe conditions that would have to be adhered for getting the duty exemption.

The changes are expected to improve domestic availability of steel products and reduce pressure on prices that has remained firm so far. Rising price of inputs like iron ore and coking coal is further putting pressure on steel companies to revise prices.

It is expected that domestic availability of various steel products could be improved by over 2.5 million tonnes if exports are undertaken only using imported material.

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FTA: India, ASEAN sort out differences over tariff cuts

NEW DELHI: India and the ASEAN have finally concluded talks on a free trade agreement (FTA), sorting out long-standing differences over proposed tariff cuts in sensitive farm products such as palm oil.

The India-ASEAN trade negotiations committee, which met in Brunei this week, managed to resolve pending issues and sealed the deal, which would result in tariff elimination on four-fifths of all traded commodities in a phased manner over the next 10 years.

Trade ministers from the 10 Asean countries and India will meet later this month to formally approve FTA, following which the legal framework for the deal will be drafted. The agreement will be signed by heads of states during the next Asean summit in December in Bangkok.

The FTA will be implemented from either January 1, 2009, or June 1, 2009, depending on how soon individual Asean members are able to ratify it, government sources said. The agreement is expected to give a big boost to bilateral trade, currently ruling at $30 billion per annum.

With the free trade agreement in place, ASEAN now seems to be ready to start talks on services and investment, which was initially supposed to be part of a comprehensive economic co-operation agreement.

When trade ministers of India and ASEAN meet on August 28, they will fix a date for beginning negotiations on services and investment. Sources said negotiations in the two areas were likely to begin in September this year with the aim of concluding it by December 2009.

An agreement on palm oil duties was reached after India decided to improve its offer in crude palm oil (CPO) to 37.5% and refined palm oil (RPO) to 45% over its offer of 43% and 51%, respectively, made in January this year, sources said. Indonesia, which had earlier proposed to end rates of 35% for CPO and 42.5% for RPO, agreed to India’s new offer.

Disagreement over tariff reduction in palm oil, rubber, tea and coffee had stalled talks for over a year. India has agreed to bring down import duties on tea and coffee to 45% (from the existing bound rate of 100%) and rubber to 50% (from the existing bound rate of 70%) by 2018.

Tariff negotiations in all trade agreements are based on bound rates, which is a ceiling beyond which a country can never increase tariffs under any situation. The applied tariffs, which are existing duties at a given point of time, are often considerably lower than the bound tariffs.

India-ASEAN trade talks have gone through several rough patches ever since discussions began in 2001. An early harvest scheme, including tariff elimination on a handful of identified products over a relatively short period of time, had to be abandoned due to disagreement over rules of origin (ROO).

ROO is a vital part of any trade agreement as it determines how much value addition to an imported product should be done by the partner country to make it qualify as a product originating there, and hence, eligible for duty concessions in the market of the other partner.

India wanted a strict ROO to prevent third-country goods flowing into the country through ASEAN nations at concessional duties.

ASEAN, on the other hand, wanted ROO to be more relaxed. The disagreement was finally sorted out once the FTA talks began. The 10-member ASEAN includes Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Thailand, Singapore and Vietnam.

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Govt assures steps to address exporters' concern

KOLKATA: Government on saturday assured that measures will be taken to address the exporters' concerns, including refunds of taxes, at the earliest.

Indian exporters were facing problems on the issue of refunds of taxes, and introduction of Goods and Services Tax in 2010 would address the problem to a great extent, External Affairs Ministers Pranab Mukherjee said.

The minister, who was speaking at the Engineering Export promotion Council India awards presentation, also said that trade infrastructure needed to be upgraded.

He said the core committee of secretaries would ensure a scheme for upgrading infrastructure for trade. Mukherjee said exports as a percentage of GDP had increased from 14 per cent in 1991 to 34 per cent in 2006-07.

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ASEAN-India FTA talks concluded

After three years of strenuous talks, negotiations for the free trade agreement (FTA) between Association of South-East Asian Nations (Asean) and India were finally concluded Thursday.

Asean secretary-general, Surin Pitsuwan, said the "last-mile" talks, held today, managed to resolve several contentious issues that had been been holding back the two from reaching an agreement.

"I have been just informed that Asean and India have concluded talks on FTA this morning. This will open tremendous synergies between India's one billion population and our 567 million people," he told Bernama on the sidelines of the Asean Energy Ministers' Meeting here today.

Surin said he was happy the deadlock over the issue of agriculture products from Asean members, which had hindered the success of the talks, had been finally solved.

"The FTA with India is Aseans fourth with a dialogue partner, following Japan, China and South Korea," said Surin, who was optimistic that similar negotiations with Australia and New Zealand could be concluded in the coming months.

Asean's Senior Economic Officials (SEOM) met their counterparts from India during the Asean-India Consultations being held during the 4th Meeting of the 39th SEOM in Brunei.

Surin said the FTA with India would offer vast business potential for both the world's largest democracy and the 10-member regional grouping which aimed to create its own European Union-style single market or Asean Economic Community by 2015.

Trade between India and Asean reached nearly US$20 billion (US$1=RM3.28) last year and is expected to grow to US$30 billion by 2010.

Asean and India had signed a framework agreement on comprehensive economic cooperation in October 2003, and negotiations were supposed to be concluded by June 2006.

The trade pact was initially scheduled to be effective on Jan 1, 2007 but differences over agriculture products remained unresolved until today's meeting.

According to previous reports, negotiations were stalled over India's refusal to roll back tariffs on petroleum, palm oil, pepper, tea and coffee in a bid to protect the domestic sector, while Asean members, especially Indonesia and Malaysia, had been pressing for more access for their palm oil exports to India.

At the initial stage, India, which adopted a free market economy in the early 1990s, issued a long exclusion list of 1,414 products in its bid to protect its sensitive agriculture and textile sectors, but later reduced it to about 560 products.

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Vietnam takes over India in apparel exports to US

NEW DELHI: After China, a small Asian country Vietnam has overtaken India in apparel exports to the lucrative US market, it shipped garments worth 4.76 billion dollars in May this year against India's exports of 3.14 billion dollars.

Out of the total 73 billion dollars annual imports by the US till May-end, Vietnam managed to capture 6.55 per cent share while China remained the largest exporter to the American market with 30.6 per cent share, a data released by the US Department of Commerce said.

Admitting tough competition from Vietnam, Confederation of Indian Textile Industry Secretary General D K Nair said: "Garment exports from Vietnam to the American market have shown an unprecedented growth of 36.39 per cent as compared to negative growth of 0.72 per cent from India in May."

On Vietnam's growth, he said cost competitiveness has given the country an edge over Indian exporters, who had been hit by rupee appreciation against dollar last year. However, the rupee has begun depreciating and situation might improve.

Industry insiders pointed out that a large number of Chinese manufacturers have shifted their base to Vietnam to benefit from low production costs there and it was pushing the country's apparel exports growth.

The neighbouring Bangladesh shipped garments worth 3.18 billion dollars to the US market while capturing a share of 4.37 per cent in the world's largest market.

Figures compiled by the US Commerce Department revealed that Mexico and Indonesia are also ahead of India, which stood at the sixth position in apparel exports to the US.

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Export sops withdrawal hits textile players

AHMEDABAD: Just about the same time when they thought that everything was working out in their favour, came yet another damper. Even as the Indian textile industry awaits imported cotton to ease the price pressure from the commodity in the domestic market, exporters anticipate poor economic policies to stifle their prospects in 2008. Trailing behind most of its Southeast Asian counterparts in terms of growth in exports to the US, the recent move by the government to withdraw interest rate subvention on export credit is set to stagnate the prospects of the textile industry in 2008.

Exporters who were benefited in the post-quota regime, took a beating in 2007 after the dollar began to slide. The Indian textile exports at $20.5 billion fell short of the $25-billion target. Despite a global slowdown and a slump in consumption in the US — the country consumes 30% of Indian textiles — exporters hoped to revive business in 2008 by tapping the fashion-driven European market where it grew by 2.8% in January 2008 over the previous January.

But, everything doesn’t seem to be in order for the textile exporters.

In what is understood to be a measure to check inflation, the Reserve Bank of India on August 1 called off the export incentives it declared earlier in wake of rupee appreciation, with effect from September 30. Under the interest subvention scheme, the exporters were compensated for reduced profits because of strengthening rupee last fiscal and got a near 4.5% relief in pre-shipment and post-shipment credit in various sectors, especially employment-intensive sectors such as textiles and handicrafts.

The withdrawal will set the manufacturing costs reeling under pressure from all fronts — high prices of cotton and man-made fibres and shortage of power in the sub-continent, and global recession making consumers shy away from new spends — and increase their burden to an extent that their competitiveness in the global textile market will be affected severely, textile secretary AK Singh said.

India has already lost out Vietnam, Bangladesh and Cambodia in terms of growth in the US market during January-May 2008 over same period last year. The Bangalore-based Gokaldas Exports, which is the largest exporter of Indian textiles, recorded a turnover of Rs 990 crore in 2007-08 with exports down 20%,“The government’s decision will further cripple the exporters. We are finding it difficult to pass on the price hike to our global buyers who have the option to go to Bangladesh, which has silently pulled the rug from underneath our feet, Orient Craft CMD Sudhir Dhingra said.

The Confederation of Indian Textile Industry has sought that the interest subvention be continued up to March 31, 2009 without any changes to sustain export competitiveness of Indian players vis-à-vis their Asian counterparts, said CITI secretary-general DK Nair. “Pakistan has announced R&D assistance at 6% for garments, while China has increased the rates of VAT refund from 9% to 13% for synthetic textile products and 11% to 13% for others,” he said.

CITI chairman PD Patodia echoed him, saying that the add-on costs will further worsen the situation.“Exporters with pending orders cannot go back on their quotations despite the fact that the move to waive off interest rate subvention on export credit will directly add to their input costs. At a time when the industry is working out measures to cut costs and increase productivity, this move will be detrimental,” associate director, Technopak Advisors Pvt Ltd, Prashant Agarwal, said.

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Firms renege on veg oil imports as prices fall

NEW DELHI: Vegetable oil traders are reneging on contracts to import palm oil as they expect benchmark Malaysian prices, which sank to a nine-month low this week, to fall further, a leading trade official said on Thursday.

"Amid falling prices, Malaysian traders complain that some Indian traders are backing out of deals and have stopped issuing letters of credit," Solvent Extractors' Association President Ashok Sethia said.

"There are expectations that prices will drop further." Falling prices and an expected rise in domestic oilseed output were likely to spur the government to reimpose import tax on crude vegetable oils and allow limited exports of some oils, Sethia added.

India, the world's biggest vegetable oil importer after China, in April allowed duty-free imports of crude vegetable oils and cut the levy on refined oils to 7.5 per cent. In March, the government had banned exports of all vegetable oils for a year despite tiny overseas sales.

India imports almost half of its annual consumption of about 11 million tonnes of vegetable oils. It buys palm oil from Malaysia and Indonesia and soyoil from Brazil and Argentina.

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Govt allows export of 25,000 tonnes of corn

MUMBAI: The government has allowed export of 25,000 tonnes of corn to Kenya, Somalia and Burundi under the United Nation's humanitarian relief operations in those countries, a trade ministry release said late on Tuesday.

India on July 3 banned export of corn till October 15. The country had on July 10 allowed export of consignments that had been handed over to customs authorities before the ban order.

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Sri Lankan MPs clash over CEPA with India

COLOMBO: Sparks flew in the Sri Lankan parliament as supporters and critics clashed over the proposed Comprehensive Economic Partnership Agreement (CEPA) with India.

India announced in July that the CEPA would be signed on the sidelines of the SAARC summit that ended here August 3.

But Sri Lanka, coming under pressure from the radical Marxist Janatha Vimukthi Peramuna (JVP), postponed the event indefinitely claiming that it needed time to discus the deal with local stakeholders.

If the JVP and its breakaway group led by its former propaganda secretary Wimal Weerawansa breathed fire on the deal and urged the government to abandon it, the pro-Tamil Tiger Tamil National Alliance (TNA) urged the government to go ahead with it without "succumbing to political pressure".

The house took up the issue Tuesday during an adjournment motion moved by MP Wimal Weerawansa, who argued that the proposed agreement would deal a crippling blow particularly to the service sector of Sri Lanka's economy.

According to media reports, Weerawansa expressed fears that the deal, the first of its kind in Sri Lanka, would leave local enterprises in doldrums because of the possibility of Indian investors gaining the upper hand, according to the provisions of the deal.

Bimal Ratnayake of the JVP charged that the government had decided to sign the deal with India in a hurry without consulting the "true industrialists" in the country.

"Today Mahinda Rajapaksa government has knelt before India and is betraying us to India. Today Chinese involvement in Sri Lanka has increased by 10 fold and India is not happy with this situation," the state-run Daily News quoted JVP MP Ratnayake as saying.

Udawatte Nanda Thera, a MP from the Jathika Hela Urumaya (JHU) - an influential party of Budhist monks - has said that the Sri Lanka had benefited "very little" from the Free Trade Agreement (FTA) with Indi and added that CEPA would mean a one-way traffic for Indian entrepreneurs.

Joining the debate, the parliament group leader of TNA, R Sampanthan, claimed that the country "is in a terrible situation with regard to economy and national problem" and stressed that the CEPA should be signed considering the economic benefits to both the countries.

"India is ready to contribute to smaller countries in the SAARC region in a much bigger way. We should go forward," he said.

Colombo district MP of the main opposition United National Party (UNP) Ravi Karunanayake has hailed the CEPA as one that "would help Sri Lanka tremendously", but stressed the need for consultation with the country's chamber of commerce to accommodate their views.

Responding to questions, Minister of Export Development and International Trade, GL Peiris, dispelled the views that India had forced Sri Lanka to conclude the deal in a hurry.

"India has granted a lot of duty free concessions to Sri Lanka and we are aiming to widen and deepen the market access to India. Through this proposed agreement we have access of eight million pieces of fabric to the Indian market," Minister Peiris said.

So far India has signed such CEPA only with Singapore in 2005. It is holding talks with South Korea, Japan and the European Union to enter into the same.

India signed a Free Trade Agreement (FTA) with Sri Lanka in 1999. As a result, Sri Lanka's volume of trade with India increased from $49 mn to $516 mn. India's trade volume with Sri Lanka has increased from $549 mn to $2.7 bn between 1999 and 2007.

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Exporters lose interest in EEFC accounts balance

MUMBAI: With the rupee weakening against the dollar in 2008, the Reserve Bank of India (RBI) has decided to withdraw some sops extended to exporters, when the domestic currency firmed to around the 39 level in 2007. The withdrawal of sops has been announced after consulting with the central government.

In a statement issued here on Monday, RBI said it has decided to discontinue payment of interest on balances parked in exchange earner’s foreign currency (EEFC) accounts from November 2008. The scheme, which RBI had unveiled in October 2007, was operational till October 2008. According to the scheme proposed, exporters were allowed to earn interest income for balances up to $1 million parked in EEFC accounts. At the time of allowing interest payments, the central bank had clarified then that this was purely a temporary measure.

According to the notification from November 1, 2008, all EEFC accounts will be treated as non-interest bearing current accounts. Standard Chartered Bank head of forex and derivatives trading (South Asia) Agam Gupta said, “The scheme did not take off well due to low amounts involved and so discontinuing interest payments on it would not have a far-reaching impact. However, lack of interest payments could lead to some exporters pulling their forex funds out and converting them into rupees, which would improve supply of rupee-funds in the market. The interest rates were left to banks to decide, and some of them could have been linked to the London inter-bank offered rate (Libor).”

Through 2007, the Indian rupee rose 13% against the dollar on account of heavy foreign fund inflows. In a bid to contain price levels and inflationary expectations, RBI, too, stayed away from artificially managing the exchange rate.

The move to pay interest on balances parked in EEFC accounts was a part of the relief package announced by the government a year ago. In July 2007, the Centre had announced measures such as speedier reimbursement of dues to exporters, reduction in pre-shipment and post-shipment credit and revision in drawback and rates on the duty entitlement pass-book (DEPB) scheme.

In October 2007, the Centre announced steps to widen the coverage and extend the time period of the reduced export credit, refunding service tax on three more services, a provision to pay interest on EEFC accounts and an increase in the revenue ceiling on Vishesh Krishi and Gram Udyog Yojana (VKGUY). The government had then said EEFC accounts would attract interest payments, subject to a set of conditions. Even as banks were given the flexibility to decide how much interest to pay on balances parked in these accounts, the Centre fixed the limit of outstanding balances at $1 million.

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Govt may allow exports of non-basmati rice to Africa

NEW DELHI: With the area under paddy cultivation increasing, the government is mulling at allowing exports of about three million tonnes of non-basmati rice to African countries after November.

Currently, export of non-basmati rice is banned to ensure availability of the commodity in the domestic market and to keep a check on inflation, which has since come closer to the 12 per cent mark.

"Even if the ban is not fully lifted, we may export 2-3 million tonnes after November to some African countries," a top Commerce Ministry official told PTI.

He said a bumper crop of 94 million tonnes of non-basmati rice is expected in November, of which six million tonnes would be surplus. India's summer-sown rice crop was planted on 23.13 million hectares as on July 31, up 11 per cent from 20.76 million hectares a year-ago. Besides a ban on the non-basmati variety, export restrictions like minimum price fixation of 1,000 dollar per tonne and export tax were imposed on the expensive basmati rice.

The country saw a record production of 96.43 million tonnes in the 2007-08 season. The rice harvest comes into the market from October. Export was allowed for the following six months, before being banned in April this year.

However, Rice exporters demanded that export ban of non-basmati rice be eased and suggested that the Centre may put a cap on the quantity to be shipped for its adequate availability in the domestic market.

There are many options available with the government to regulate instead of putting a blanket ban on the exports, All India Rice Exporters Association President Vijay Setia said.

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