New Delhi: The government on 13 June decided to speed up refund of certain taxes and reduce the premium on insurance cover on exports to cushion traders from impact of rising rupee while agreeing to consider their bigger demand of increase in rates of duty refund under various schemes.
“All arrears of Terminal Excise Duty and Central Sales Tax reimbursement would be cleared by June 30. The Export Credit Guarantee Corporation (ECGC) will reduce its premia rates by up to 10%,” Commerce and Industry Minister Kamal Nath said after meeting export promotion organisations.
ECGC, which provides risk cover to exports, is a public sector entity under the Commerce Ministry and the decision would be implemented immediately.
The Commerce Ministry has also agreed to recommend to the Finance Ministry to enhance rates of duty neutralisation schemes like Duty Entitlement Passbook Scheme (DEPB) and Duty Drawback by 5%.
When pointed out the Finance Ministry might not agree to the proposal as it would involve outflow from the exchequer, Nath said: “When two ministries disagree there is a system in the government. There is a process also and that will be resorted to. There is the Cabinet.”
The ministry would also recommend to the Finance Ministry for reducing interest rate on pre-shipment and post-shipment credit to exporters to six per cent and paying interest on Exchange Earners’ Foreign Currency (EEFC) accounts.
At present, no interest is paid on EEFC account.
Nath said banks are required to direct 15% of their loans to export sector and the Commerce Ministry will ask Finance Ministry to ensure this stipulation was met.
“The Finance Ministry will be requested to notify Service Tax Exemption and Refunds for exports announced in Foreign Trade Policy without delay,” Nath said after meeting FIEO and other export promotion councils.
The minister said a committee would be set up to assess losses in jobs and new orders due to rupee appreciation. The Committee will include representatives of Commerce Ministry, DGFT, Indian Institute of Foreign Trade, Textile and Labour Ministries. It will submit its report in 30 days, he said.
“The rise of rupee by 13% in the last two months is having an impact on new orders and resulting in employment loss... it is a problem but also an opportunity to move toward greater efficiency, reducing costs and enhancing competitiveness,” he said.
In its presentation, FIEO said the due to rupee rise, realisations for chemicals has fallen by 12%, textiles by 6.5%. Exports are likely to dip by 20-25% for processed foods and agri items, electronics, electrical and steel products, it said.
FIEO President G K Gupta said around 4 million jobs in the export sector would be lost if rupee continues to rise and loss would amount to Rs40,000 crore ($10 billion) this year.
Director General of FIEO Ajay Sahai said the rise in rupee in the last one year resulted in a loss of $5-6 billion in 2006-07.
Along with FIEO, chairman of Engineering Export Promotion Council Rakesh Shah also met Nath and told him about the problems being faced by engineering exporters.