EU, China agree to end textile quotas

Beijing, Oct 10 (PTI) The European Union has agreed to end quota restrictions on Chinese textile imports with a joint surveillance system in place to monitor the trade flow in 2008, the state media reported today.

The "double checking system", which will track the issuing of licenses for export in China and the import of goods into the EU, will operate for one year in 2008 following the end of quota restrictions on Chinese textiles and clothing, the EU commission said in a statement in Brussels.

After a "textile war," the EU and China reached an agreement in June 2005 on resuming quotas on China's textile exports to the EU, which expires at the end of 2007.

Although imports of these goods will be closely monitored, the level of import will not be restricted by this arrangement, the EU's executive arm said, according to the official Xinhua news agency.

"I welcome this further step in the cooperation between the EU and China in ensuring a smooth transition to free trade in textiles," said EU Trade Commissioner Peter Mandelson.

According to the EU Commission, the joint surveillance system will cover eight categories of textiles and clothing from China.

The system will be formally adopted by the commission in the coming days. On the EU side, national licensing offices will be in charge of the monitoring, the report said. ----PTI

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Lowering export target inevitable

NEW DELHI: A day after Commerce Secretary GK Pillai said the export target of 160 billion dollars for 2007-08 was difficult to achieve, exporters body FIEO on Tuesday said lowering the goal post was inevitable in the backdrop of unabated strengthening of the rupee.

"Lowering of export target to 140 billion dollars is inevitable in view of strengthening of rupee. It is a foregone conclusion," Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta said here.

He said expansion plans of many export firms have been shelved and the closure of a large number of tiny, cottage and small sectors would lead to unemployment.

"It is estimated that eight million jobs will be lost due to lower exports," Gupta said requesting the government to take effective steps to restore competitiveness of Indian exports.

Over 10 per cent rupee appreciation since March this year has resulted in erosion of margins for exporters. The government has taken several measures like increase in the tax refund rates in the popular Duty Entitlement Pass Book Scheme and exemption from service tax in select areas. It has also announced re-introduction of interest rates on the Exchange Earners Foreign Currency Account.

However, the constant inflow of funds from foreign institutional investors has kept the pressure on the dollar.

The government had fixed an export target of 160 billion dollars in April this year. Against a growth of 25 per cent last year, the export growth for April-August has declined to 18 per cent.

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Manufacturing units hit by rising rupee, Chinese imports

Chennai, Oct 9 Larsen & Toubro feels that the rupee appreciation combined with the Chinese artificially locking in their currency is affecting some of the manufacturing units in the company. It has apprised the Centre of this and wants it to act before Indian manufacturing is badly affected.

“My appeal to the Government is impose 30 per cent anti-dumping duty on China until such time they float the currency. The day they float the currency, withdraw it (the anti-dumping duty),” Mr A.M. Naik, Chairman and Managing Director, Larsen & Toubro Ltd, told here on Monday.

L&T has a number of manufacturing units that are affected by imports from China. They are small units and hence overall the company is not affected much. However, the units – producing plastic and rubber machinery, valves and medical equipment – in Tamil Nadu and Karnataka have over 2,000 employees and get almost half their turnover from exports.

Artificially locked in

At its weakest, the rupee was Rs 48 to a dollar and at its strongest, at Rs 39.50, an over 20 per cent appreciation of the rupee. This itself was a major impact on exports. While the rupee was free floating, the Chinese currency yuan was “artificially locked in” at a low price, Mr Naik said and added that if China freely floated its currency, it would appreciate within a week and then all of L&T’s units would become competitive.

He said he had taken this up with the Government, including the Finance and Commerce ministers, and highlighted that Indian industry would be wiped out, if not badly affected, by Chinese imports.

He had even told the Government that if these businesses did not do well, the company would be forced to either close them down or sell the units. He even wanted the Government to take the matter to the WTO to straighten out the issue.

No decision now

Mr Naik said these units were struggling but L&T was not going to take a decision on them right now. “We are struggling. We can’t give up something unless we make a full representation to the Government and see if we can resolve this issue,” he said.

On a two-day visit to the city, the L&T CMD said the rupee appreciation and the Chinese currency artificially locked in offered Chinese manufacturers a 35 per cent cost advantage. L&T could make up with productivity, but not to the extent of 35 per cent, he said.

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India, Lanka sign MoU on Tariff Rate Quota

NEW DELHI: India and Sri Lanka on Friday signed an MoU to finalise procedures for operationalising the Tariff Rate Quota (TRQ), under which Colombo will enjoy duty-free export of three million apparel pieces to its neighbour.

As per the India-Sri Lanka Free Trade Agreement that came into force on March 1, 2000, the Island nation can export to India in one calendar year, three million pieces of apparel articles covered under the FTA, on duty free basis and without any restriction on entry points and sourcing of fabrics.

The MoU was signed by Joint Secretary in the Ministry of Textiles Qaiser Shamim and Additional Secretary in the Sri Lankan Ministry of Textiles Industries W D Jayasinghe, an official release said.

Under the MoU, the Textile Quota Board and Department of Commerce, Sri Lanka would be the nodal agency for issuance of quota and certificate of origin for apparel articles export. From India, the Textiles Committee would monitor the TRQ parameters, it said.

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‘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.

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Kamal Nath says exporters need more relief

New Delhi, Oct 6 The Union Commerce and Industry Minister, Mr Kamal Nath, on Saturday gave a qualified welcome to the mini-package for exporters announced by the Finance Ministry in the wake of the appreciating rupee, stating that he would continue to press for more relief required for exporters.

Mr Nath said at a news conference in his office here that rupee appreciation, though a sign of resilience of Indian economy, has become a matter of particular concern to exporters whose import-intensity in export production is not much. He said that a Committee has been set up to address this serious concern.

He also said that last week the Prime Minister, Dr Manmohan Singh, had asked Dr C. Rangaraman, Chairman, PM’s Economic Advisory Council, to study the problems plaguing the export sector in the aftermath of the appreciating rupee, as also the slowdown in industrial production, and prepare a report within a month.

He welcomed the Finance Ministry’s decision to allow interest on Exchange Earners Foreign Currency (EEFC) account and also extending services-tax exemption to four more areas, making such exemptions available for seven services. He said that his ministry would plead for inclusion of other services-tax exemption too and the modalities for this were being worked out.
Cost of relief

To a specific query about the cost of the relief announced on Saturday, in the light of the Rs 1,400-crore package announced in July 2007, Mr Kamal Nath said that it was not proper to estimate loss of tax revenue for these incentives to exporters as they are only notional. He said export activities generate their own spin-off effects, which produce more revenue to the exchequer.

Stating that export was no longer an exchange-earning activity but more of providing gainful employment through sustained economic activities, the Minister said that despite the appreciating rupee he was not revising the export growth set for the current fiscal, which is likely to be 20 per cent in dollar terms. He said that product coverage under Vishesh Krishi and Gram Udyog Yojana employment-intensive industries would be expanded, and he cited minor forest produce and food processing industries as those with good employment potentials. Meanwhile, the President of the Federation of Indian Export Promotion Organisation, Mr G.K. Gupta, and the Vice- President, Mr A. Sakthivel, while hailing the relief package, regretted that main services such as commission to foreign buyer, overseas travel, courier charges and charges to customs house agents, which continue to impact all exporters substantially, remain outside the remission mechanism.

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Exporters get more sops on service tax, credit

Rupee relief: Enlarged coverage of export schemes

Bowing to exporters’ demands, the Government on Saturday announced a new set of relief measures for exporters in the wake of rapid appreciation of the rupee in recent weeks. On Thursday, the rupee hit 39.36 per dollar, is the strongest since March 1998.

The latest package comes on top of the estimated Rs 1,400- crore financial relief measures, announced in July this year, which included accelerated reimbursement of dues to exporters, reduction in pre-shipment and post-shipment credit and revision in drawback and DEPB rates.

The Finance Ministry had also in mid-September said that refund of service tax would be available in respect of four services, which are not in the nature of “input services” but could be linked to export of goods.

The relief measures announced on Saturday included widening of the coverage as well as extension of the time period of the reduced export credit, refund of service tax on three more services, a provision to pay interest on exchange earners foreign currency (EEFC) accounts and an increase in the revenue ceiling on Vishesh Krishi and Gram Udyog Yojana (VKGUY).

More products are proposed to be covered under VKGUY, which is a scheme to promote export of agricultural and village industry products. For this purpose, the revenue ceiling for 2007-08 has been fixed at Rs 500 crore, up from Rs 200 crore set earlier.

The coverage of the 2 per cent interest subvention, made available in July 2007 to nine specified sectors, has been expanded to include sectors such as solvent extracted de-oiled cake and plastics and linoleum. Also, jute and carpets (under textiles) and processed cashew, coffee and tea (under processed agricultural products) would be eligible for this.

The scheme of reduced interest rates under pre-shipment as well as post-shipment credit would now be applicable up to March 31, 2008 as against the earlier announced December 31, 2007. The three new services for which refund of service tax would be available to exporters are general insurance services, technical testing and analysis agency services and inspection and certification agency services. Official sources said that refund of service tax on general insurance services would lead to revenue loss of Rs 1,000 - 1,200 crore in a financial year to the exchequer.

On EEFC accounts, the Government has now said that such accounts would be interest bearing so long as certain conditions are met. It has allowed banks to determine the interest rate, but stipulated that interest would be permissible on outstanding balances to the extent of $1 million per exporter. The facility of availing interest on EEFC accounts would be valid up to October 31, 2008. Such accounts should be in the form of term deposits with a maturity of up to one year, the RBI has said.

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Pak court orders release of detained Indian sugar

New Delhi, Oct. 4 The month-long saga involving detention of Indian sugar by Pakistani customs authorities on public health grounds is finally over.

6,800 t Released

The Lahore High Court has ordered the release of nearly 6,800 tonnes of imported Indian sugar lying in railway godowns, having been seized for allegedly containing high levels of sulphur dioxide and not confirming to required ICUMSA (International Commission for Uniform Methods of Sugar Analysis) standards.

In his order on Wednesday, Mr Justice Syed Hamid Ali Shah directed the release of the impounded sugar, dismissing the petition of the Pakistan Sugar Mills Association (PSMA) and allowing the two importers, Rana Brothers and Sawera Group, to sell the product in the local market.

Held up since Aug

While Rana Brothers had imported one rake of 2,392 tonnes from the Saraswati Sugar Mills at Yamunanagar (Haryana), Sawera had bought two rakes of 2,272 tonnes and 2,093 tonnes from the Seksaria Biswan Sugar Factory at Sitapur in Uttar Pradesh.

The consignments had entered Pakistan through the Attari-Wagah border around August-end; and had since been held up at the railway godowns.

‘Irrelevant’

The importers challenged the detention, stating that the issue of public health had not been raised when 7.46 lakh tonnes (lt) of Indian sugar were imported by the Trading Corporation of Pakistan and sold across utility stores in the country.

The controversy over ICUMSA, they pointed out, was irrelevant because it pertained merely to the colour of the sugar and not to whether it was fit for human consumption. They also contended that the sugar was being consumed in several countries including
Afghanistan and Bangladesh.

The imported product was of 140 ICUMSA, which was well within the prescribed standard for plantation white sugar even if not for refined sugar.

PCSIR FINDING

As regards sulphur dioxide, it was pointed out that the substance was used as a preservative in several edibles, including fruit juices and colas, in volumes higher than the ones found in the imported Indian sugar.

The first petition against the imports was filed by Mr Luqman Ahmad, a sugarcane grower.

The Pakistan Sugar Mills Association moved the second petition asking the court to stop the marketing and sale of Indian sugar in Pakistan. Its counsel, Mr Chaudhry Fawad Hussain, said the imported sugar was hazardous to health.

He also contended that Indian sugar was being imported despite the fact that Pakistan Council of Scientific and Industrial Research (PCSIR) laboratories had declared presence of 30 mg per kg sulphur in it in the past.

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Onion exports only with special licence: Govt

NEW DELHI: The government on Thursday slapped restrictions on onion exports, saying the edible bulb can be sold overseas only with a special licence aimed at ensuring adequate availability of the commodity in the domestic market.

Commerce and Industry Minister Kamal Nath "has decided today that the exports of onion, which was hitherto canalised through the designated public sector agencies be restricted immediately," an official statement said.

"Accordingly, a notification has been issued by the government providing that the exports of onion shall herein after be restricted and permissible only under an export license through designated canalising agencies," it added.

The government is trying to ease onion prices, which have risen to Rs 25-30 a kg in retail markets across the country from about Rs 15 a kg two months back.

Earlier today NAFED, the government agency that facilitates onion trade, said there was no bar on export of the commodity but it was only going slow on granting no-objection certificates to exporters.

"The export of onions is still on. However, concerned by the rising prices of onion... certain measures have been pressed into to check the ongoing spurt in the prices of onion," National Agricultural Cooperative Marketing Federation (NAFED) Managing Director Alok Ranjan said in a statement.

To deter overseas sale of onion, NAFED had first increased the minimum export price by $50 for all destinations.

"New NOCs will now be issued to exporters when they submit the utilisation report for NOCs issued to them earlier," he said.

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Rising rupee does not spare domestic manufacturers

New Delhi, Oct. 2 Not only has the strengthening of the rupee vis-À-vis the greenback been denting export margins, but it is now beginning to hit those manufacturing for the domestic market.

Among those affected are manufacturers whose products are substitutable by imports, which have turned cheaper as the rupee hardens. The trend is evident in a bevy of sectors such as chemicals, textiles, standardised auto components and tyres, where imports have been on the rise.

Domestic suppliers to export firms are also taking a hit as exports falter. Further compounding the woes of the domestic manufacturing sector is the fact that India is fast turning into a high-cost economy, with spiralling real estate prices, increasing interest rates and high cost of infrastructural overheads such as power and freight costs, all of which translate into whittling down of margins.

Margin squeeze

Mr Ashish Bharat Ram, Managing Director, SRF Ltd, said, “The rupee appreciation is adversely impacting those domestic manufacturers where the product is substitutable by imports.” He explains that even in cases where raw material is imported, margins are being squeezed. “Imports of raw material from China, for instance, are of special concern as the yuan has not been revalued, and this puts pressure on margins even further.”

Jubilant Organosys’ Executive Director (Finance), Mr R. Sankaraiah said, “The impact of the rupee appreciation is also on those industries that are importing commodities as raw material at par with international competition.”

The rising rupee has, on the flip side, rendered imports into India more competitive. Sona Koyo Chairman and Managing Director, Mr Surinder Kapur, said, “An impact would be felt by those who make standardised auto components where import substitution is possible.”

In the case of textile products, during the 12-months to March 2007, imports from Pakistan jumped 66 per cent while cotton yarn and fabric imports from Pakistan were up 74 per cent and from Sri Lanka 65 per cent, according to latest DGCI&S data. The auto components sector is seeing similar trends.

Impact meter

The Marketing Director of JK Tyres, Mr A.S. Mehta, said, “When domestic players share the same platform as overseas players, the impact is serious. While imported goods prices are down, manufacturers who use local raw material have no advantage in production cost. Chinese tyre imports have always been a concern. Partial withdrawal of subsidy by the Chinese to their manufacturers had reduced the price gap, but rupee appreciation has once again made it an issue.”

Firms supplying to exporters are also taking a hit as exports wobble. Mr Mukund Choudhary, Managing Director of Spentex Industries, said, “Most of our domestic yarn sales go into deemed exports. Since exports of readymade garments have been hit, naturally it affects our domestic sales.”

A number of leather manufacturers in smaller centres such as Agra and Kanpur, who supply to exporters, are also witnessing a dent in sales.

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