Rs 1.4k cr sop for rupee-hit exporters

NEW DELHI: The government on Thursday announced a Rs 1,400-crore package to provide relief to exporters hit by the appreciating rupee. The package includes a hike in drawback rates on most items and inclusion of some more items in the drawback list. Duty entitlement pass book (DEPB) rates have also been increased.

Concessional pre- and post-shipment credit for small and medium exporters is also part of the package. In the case of textiles, readymade garments, leather products, handicrafts, engineering products, processed farm products, marine products, sports goods and toy exporters, cheaper credit would be available to large players too.
Exporters, while welcoming the package, said it fell short of their expectations.“DEPB rates have been enhanced by 3% for textiles (including handlooms), readymade garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys,” commerce & industry minister Kamal Nath said. For other sectors, the rates have been increased by 2%.

The government has also released Rs 600 crore to clear all arrears related to reimbursement of terminal excise duties and CST, Mr Nath said in a statement issued here. The package is based on recommendations from the commerce department.

Fieo chief Ganesh Kumar Gupta welcomed the decision to drop interest rate for exporters by 2%, but added the drawback rates should have been increased 5%. Giving retrospective effect to the new rates from April 1 would help, he added.

Speaking to ET, Apparel Export Promotion Council chairman Vijay Agarwal said the 3% increase in duty drawback rate would only help arrest the recent decline in exports. “For exports to grow, the government will have to raise duty drawback figure by another 2% and initiate some mechanism to keep the rupee in check,” he said.

The government has already reduced insurance premium for exporters by 10%. However, relief from service tax is elusive as the commerce department’s proposals are under consideration of the finance ministry.

According to Council for Leather Exports chairman M Ameen, the industry would now be able to go to the buyers with new offers. “We were expecting more, but we will try to make do with this,” he said.

“The enhanced rates of tax refunds through duty drawback scheme on nearly all products will be effective from April 1, 2007,” finance secretary D Subbarao said while announcing the package. The sops would enable the country to meet the 2007-08 export target of $160 billion. “There was no reason to apprehend the target would not be met,” he said.

Mr Subbarao said there is no one-to-one relationship between rupee appreciation and export decline, which depend on many factors. The hike in drawback rates will cost the exchequer Rs 800 crore while concessional credit package will cost Rs 500 crore.

“The enhanced rates of duty drawback would cover almost all products,” revenue secretary PV Bhide said. The impact of tax paid on services used as inputs in the manufacturing or processing of exports has been factored in duty drawback rates, he added.

In some cases such as primary steel, dyes and chemicals, drawback rates have been reduced due to reduction of duty on inputs. The reduced rates will take effect prospectively and the notifications are expected on Friday.

Under the concessional pre- and post-shipment credit package, banks would charge interest rate not exceeding benchmark prime lending rate (BPLR) minus 4.5% on pre-shipment credit up to 180 days and post-shipment credit up to 90 days on the outstanding amount till December 2007, financial sector secretary Vinod Rai said. At present, banks charge interest rates not exceeding BPLR minus 2.5%on the two kinds of credit.