Though the country's exports has had a good run during the first half of the current fiscal fetching $160 billion, exporters continue to make strident demands for dollops of incentives.
This is because the external market particularly the major ones of Europe and the US remains in doldrums and the transaction cost to explore alternative markets with uncertain returns threatens to eat into their wafer thin margins.
Against this mixed signal of hitherto sound performance and uncertainties about short-term prospects, given the troubled times the global economy is in, the Ministry of Commerce and Industry on Thursday unveiled a package estimated to hover between Rs 1,700 crore and Rs 1,800 crore by way of fresh benefits to the exporting community. This includes the recent RBI grant of interest subvention of two per cent on select labour-intensive exports amounting to Rs 900 crore.
The Commerce Secretary, Dr Rahul Khullar, told
Following are the excerpts from the interview:
What is the message your Ministry has sent by this package today to the exporting community?
First the five-year foreign trade policy which was announced in 2009 has worked and there is no need to change it. If it is not broken, why do you want to fix it? We just continued with the same policy. This is a break from tradition where every year we used to come out with a supplement almost conveying the impression as if we are changing the policy.
There is a credible signal that there is a policy for five years which is working well and so we are continuing the same.
The second message is that even if you persevere with that strategy, what do we need to do? The aspect here is the special focus market and focus product schemes. There are clearly some markets where we need to focus much more strongly. They are Latin America, Africa and CIS. In these places, we will give you higher incentives of 4 per cent scrip instead of 3 per cent to further incentivising people to switch to these markets.
The third component is can we take care of certain sectors which are not getting anything so far? That is the 130 products covered in the focus products. Here the big gainers include denim, man-made fibres like viscose yarn and pharmaceuticals where you are encouraging not generics but intermediate and bulk drugs. If you produce bulk drugs which go into production which is an intermediate input and if you are capable of exporting it, you will get incentives.
We give a big thrust to engineering, electronics and telecom. Because of the Information Technology Agreement you cannot change the tariff and if somebody is intrinsically competitive and if you give them benefits and let them export, that is something that needs to be encouraged. These broadly explain the new things announced today.
As Electronic Data Interchange (EDI) is the main pillar to reduce transaction cost to trade and industry, how long the exporters have to wait for paperless interface with the various wings of the Government to focus their energy on their core task?
EDI is not still fully in place and this is going to take some time. The DGFT is trying within the limitations of their own resources to make themselves as e-friendly as possible. You can do so much on your own.
When you need interaction and interface with other departments, then everybody has to come on board. Until the EDI is fully done up and running, we will continue to have difficulty.
On interest cost to trade and industry: Interest cost is very high. Foreign currency denominated credit was not a big problem last year but this year it is.
We are setting up the same team that we set up in 2009 with Deputy Governor, RBI, and the Chairman of the IBA as members of the Committee to give certain seriousness to resolve this. If they get packing credit in foreign currency, that will solve their problem. Interest rate subvention is on a rupee credit. If I can take the receivable of packing credit in dollar and place that against dollar loan, the interest-rate on dollar loan is lower, I can save a lot of hassles.