With the country's export juggernaut losing traction as evidenced in the August trade growth plummeting to 44.2 per cent from over 81 per cent in July and the prospects for the remaining months of the current fiscal none too encouraging, the exporting community has sought a host of benefits, including affordable export credit and drastic cut in transaction costs.
Export credit
Talking to Business Line here informally, the Federation of Indian Export Organisation (FIEO) President Mr Ramu S. Deora recalled that with the adoption of base rate by banks, removal of concessional export credit and frequent hikes in the base rates, the cost of export credit to trade and industry has now escalated to unaffordable levels.
He said in the last one year the rate of interest for rupee export credit has already crossed over 11.5 per cent with many banks charging as high as 13 per cent. The sharp drop in manufacturing and industrial growth in July 2011 could be attributable to the lack of investment and demand due to the high interest rate regime following the 475 basis points spurt in policy rates from August 2010, the FIEO chief stated.
The obverse side to high domestic cost of export finance is that the foreign currency credit, PCFC (Packing Credit in Foreign Currency or, in common parlance, pre-shipment credit in foreign currency), which ought to be made available at LIBOR (London Inter-Bank Offer Rate) plus 200 basis points, is not being extended by the banks, Mr Deora rued.
He pitched for at least 50 per cent of the dollar earned by exporters to be made available to them by way of PCFC and urged the Department of Commerce to take up the issue with the apex bank to ensure substantial availability of PCFC.
Interest subvention
Mr Deora underlined the importance of reinstituting the interest subvention scheme for exporters with retrospective effect from April 2011 at a subvention rate of at least three per cent to make good the high cost of export credit the exporters must perforce fork out to execute shipment overseas.
EDI
Alongside, he pleaded for early putting in place of Electronic Data Interchange (EDI) to ensure seamless movement of export cargo from factory gate to ports, both sea and air, so that the high transaction cost is abated.
He said all thirteen community partners in the EDI system such as Customs, DGFT, banks, ports, airports, shipping agencies, export inspection agencies and other regulatory bodies that are very much in the thick of export and import process should be brought under EDI by upgrading the EDI or plugging the last-mile loopholes in the system within a reasonable timeline for providing the much-needed relief to trade and industry.
Bi-lateral pacts
Asked about the recent visit of the Prime Minister, Dr Manmohan Singh, to Dhaka (Bangladesh), Mr Deora hoped that the Bilateral Investment Promotion and Protection Agreement (BIPPA) and Standard Operating Procedure (SOP) between India and Bangladesh would enable investment-led trade.
He said New Delhi should go in for multi-entry business visas to bona fide Bangladeshi business persons as this would go a long way in increasing interaction, besides fostering awareness of each other's business potentials.
He was also hopeful that at the recent meeting between the Commerce Ministers of India and Pakistan, the Commerce and Industry Minister, Mr Anand Sharma's observation that officials concerned on both sides have been asked to expeditiously wrap up the liberal business visa regime by November this year would herald high interaction and heightened bilateral trade volumes.