Panel to suggest steps to lower transaction cost for exporters

Worried over the widening trade deficit and declining exports, the Commerce Ministry has set up a committee to suggest steps to reduce transaction cost with a view to make shipments more competitive.

“The committee is chaired by Minister of State for Commerce and Industry D. Purandeswari. It will submit its report within three months. It would examine the problems faced by exporters that pushed their transactions costs,” a top official in the Commerce Ministry told PTI.

The committee also comprised officials from the Director-General of Foreign Trade (DGFT) and industry players.

“Exporters are bearing the brunt of high transaction costs. It is severely affecting the country’s exports,” the official said.

According to industry experts, the quantum of transaction cost is 7-10 per cent of the total value of Indian exports. This amounts to a significant $15 billion.

Further, the average cost to an exporter on account of transaction cost has been monetised at $945 per container as compared to $460 in China, $450 in Malaysia and $625 in Vietnam.

“These figures clearly reflect the burden of transaction cost on exporters. It needs to be eliminated in order to boost exports and reduce the trade deficit,” Apparel Export Promotion Council Chairman A. Sakthivel said.

Marking a recovery after a gap of eight months, India’s exports grew by a marginal 0.82 per cent in January, but the trade deficit widened to around $20 billion, the second highest figure ever in a month.

However, during the April-January period, overseas shipments shrank by 4.86 per cent to $239.6 billion.

The official said although a task force in 2011 had announced few measures to reduce costs, those steps have not been implemented completely.

“There is an urgent need to re-look all those measures,” the official added.

The Current Account Deficit (CAD), which occurs when a country’s total imports of goods, services and transfers is greater than the country’s total export of goods, services and transfers, continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports.

The CAD had touched a record high of 5.4 per cent of GDP in the July-September quarter.

Apex exporters’ body FIEO suggested that the complete electronic flow of all the relevant documents would help in reducing costs substantially.

“Currently, about 13 agencies are involved in exports that include DGFT, banks, RBI, Customs and chambers. But the flow of documents is not smooth among them. This puts additional burden on exporters. Full Electronic Data Interchange will help exporters a lot,” FIEO Director-General Ajay Sahai said.

In 2011, the Government had announced 21 steps like round-the-clock Customs clearance at eight major ports, reduction in bank charges on foreign currency and concessional loans to cut transactions cost.