Cut in duty drawback refunds to negate rupee effect: EEPC

NEW DELHI: Terming the government's decision to reduce duty drawback rates for the engineering sector as a "shocking development", exporters body EEPC today said the move would negate the positive impact of rupee depreciation.


The Engineering Export Promotion Council (EEPC) in a statement expressed strong resentment and disappointment over the government's decision to cut the rates by 26-30 per cent.

"It is a shocking development and it will make negate the positive impact of rupee depreciation," EEPC India Chairman Mr Aman Chadha said.

Duty drawback is the refund of duties on imported inputs for export items.

Last week, the government has rationalised the duty drawback and brought more items under the scheme for tax refund to exporters. It has reduced the rates for different engineering items.

The rupee has depreciated more than 20 percent since May and had touched an all time low of 68.80 to a dollar on August 28.

Chadha said that the sector, which contributes about 20 per cent to the country's total export basket, the drawback rates have been cut at a time when the sector holds the most critical key to India's vulnerable current account deficit.

"The government should immediately refix the duty drawback rates," he said, adding "the average rate reduction on engineering goods has been 26-30 per cent and such a sharp reduction in the present time will have a serious impact on engineering exports".

He said that by substantially reducing the rates on different engineering items, the government's objective of boosting exports may not be realised.

"We suggest that the drawback rates be increased by 25 per cent across the board to offset such handicaps of exporters. Instead, the new rates have been lowered by more than a quarter," he added.

After declining for four months in a row, India's engineering exports turned positive in August and registered a marginal growth of 2.18 per cent to USD 4.68 billion compared to a year-ago period.