Kochi: A rising rupee has created severe financial problems for some commodities, especially plantations and marine products, say trade groups.
They are now seeking support from the government to offset losses from the strong rupee, which has risen more than 9% against the dollar since January. Since these commodities depend primarily on exports, the rise in the rupee erodes their earnings when dollars are converted into the local currency.
For labour-intensive sectors such as leather, handicrafts, and gems and jewellery, the government was planning to waive some of the local taxes and levies as they are the worst hit by the rising rupee. Now, the plantation and marine sectors, too, have started demanding similar concessions.
The government is considering sops for the leather, handicrafts, and gems and jewellery sectors as they have very little import content and hence are not getting any advantage of the rising rupee to lower their input costs. The plantation and marine sectors feel their situation is no different as they import very little raw material.
The plantation sector accounts?for?export?revenues of around Rs4,000 crore and a rising rupee is hurting earnings, maintains J.K. Thomas, president of planters’ body United Planters Association of South India (Upasi). In India,?around 1.3 million growers and 2.3 million labourers are involved in the plantations sector.
The marine sector’s export earnings crossed Rs7,000crore during last fiscal. This labour-intensive sector is also facing the burden of high interest rates.
The marine exporters’ body, Seafood Exporters Association of India (SEAI), is expected to hold talks with commerce minister Kamal Nath on Wednesday and seek concessions to cushion the impact of the rupee’s appreciation.
SEAI’s national president A.J. Tharakan says the livelihood of more than five million people, including fishermen, aquaculture farm owners and their workers, is at stake.
The local currency appreciation across major plantation crop producers during the first six months of 2007 shows that, except for Colombia, Brazil and India, currencies of other countries rose less or even depreciated. In the case of Sri Lanka and Vietnam, major competitors producing pepper, tea, coffee and rubber, the local currencies have actually depreciated. This will affect India’s exports since most of the countries like to import material from them to take advantage of a weak currency.
“Looking at the composition of Indian exports, which are price-sensitive and predominantly invoiced in US dollars, our export value realization will be grossly affected,” Thomas points out.
According to him, India should take a cue from Colombia that is earmarking $105 million (Rs431 crore) for subsidies to surmount the peso’s appreciation.
“The relative importance of the plantation sector vis-à-vis other subsectors in agriculture is evident from the fact that while it accounts for just 1% of the cropped area in the country, the total value from this sector is around 2% of the agricultural GDP,” says Thomas.
The benefits of any government scheme, Upasi says, should be limited to growers and producer-exporters. Normally incentives under any remission and duty drawback schemes are given to merchant exporters and the benefits are not passed on to the duty-paying producer. In a supply-driven commodity such as plantations, it’s difficult to pass on the benefits of duties and taxes to the buyers.
Sushma Srikandath, chairperson of the spice trade body All-India Spice Exporters Forum, says that the rupee appreciation will mean at least an 8% fall in export earnings, and a decline in exports, especially to the US.