Home / News / India /  Rupee request from Lanka worries Indian exporters

BENGALURU : Indian exporters are in a fix over shipments to Sri Lanka under the $1bn line of credit, with importers from the debt-ridden island nation seeking quotations in rupees, which may deprive Indian suppliers of export incentives under various government schemes.

Unsure whether Sri Lankan buyers will make the payment in rupees or dollars, exporters have reached out to the government seeking clarity on whether the export benefits for non-fuel items will be available even in case the payments are made in rupee terms.

Usually, export incentives such as Rebate of Duties and Taxes on Export Products (Rodtep), duty drawback, and Export Promotion Capital Goods (EPCG) are available only if payments come in freely convertible currencies, which rupee is not.

“We have learnt that Sri Lankan importers are asking for quotes from Indian suppliers also in rupee. We are examining the issue," said a government official.

Exporters are unable to arrive at the quotation for exports as they will need to build into the cost the unavailability of incentives, if they are not available for shipments made in rupees.

The State Bank of India is providing about $1.5 billion short-term concessional loan facility under an agreement signed between the two governments last month.

Registration for the import of essential goods could be done between March 21 and 28 for the calendar year 2022.

Of the $1.5 billion, $500 million was exclusively for import of fuel. India’s assistance also included a $400-million Reserve Bank of India currency swap and a deferral of a $500-million loan repayment by Sri Lanka.

Sri Lanka has prioritized its imports against the line of credit to include food, pharma, animal fodder, raw material for industry, cement, textiles and special fertiliser varieties.

The matter was also flagged by the Federation of Indian Export Organisations in a meeting with commerce and industry minister Piyush Goyal. “While importers have been allocated the authorization for such imports in 2022, they are asking for the quote in Indian rupees and, therefore, exporters are a little confused whether such exports will be eligible for export benefits," the apex exporters’ body told the minister.

“A suitable clarification may be issued so that Indian exporters may take a conscious call while finalizing such contracts," the exporters told the minister. If export benefits are not available, it will be a factor in their final costing, they pointed out.

Queries mailed to the department of commerce on Monday remained unanswered at press time.

The $500 million line of credit to Sri Lanka for fuel imports has been extended amid delays in working out a bailout package with the International Monetary Fund.

Sri Lanka has been struggling to pay for imports after its forex reserves depleted sharply, causing a devaluation of its currency and spiralling inflation.

The state-owned credit insurance provider ECGC had earlier this month put exports to crisis-hit Sri Lanka under its ‘restrictive cover’ category in view of rising risks pertaining to payment delays or defaults on shipments. The restrictive cover or RCC-1 leads to revolving limits normally valid for a year, which are approved specifically on a case-by-case basis. However, the premium rates for the shipments insured remain unchanged.


Dilasha Seth

" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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