The Hindu : Business : Rs. 1,400-cr. package for exporters announced

Online edition of India's National Newspaper
Friday, Jul 13, 2007
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Business

Rs. 1,400-cr. package for exporters announced

Special Correspondent

To counter rupee appreciation; nine sectors to benefit

— Photo: R. V. Moorthy

A BIG RELIEF: D. Subbarao (left), Finance Secretary, and Vinod Rai, Secretary, Financial Sector, at a press conference at North Block in New Delhi on Thursday.

NEW DELHI: The Central Government on Thursday announced a comprehensive Rs. 1,400-crore package to rescue exporters from the ill-effects of the sharply rising rupee and be on track to achieve the $160-billion export target set for the current fiscal. The package includes increased rates of tax refunds through the duty drawback scheme and availability of pre and post-shipment bank credit at far easier terms.

The compensation package for the exporting community has not come a day too late, as in the wake of over 10 per cent appreciation of the rupee in the foreign exchange market, a large cross-section of exporters were hit severely and fears were being expressed over not only the export target not being met but also the distinct possibility of lay-offs and large-scale unemployment. Unveiling the package for exporters to newspersons at a briefing here, Finance Secretary D. Subbarao said: “The enhanced rates of tax refunds through [the] duty drawback scheme on nearly all products have been made effective from April 1 [2007] and will cost Rs. 800 crore to the Central Exchequer.”

Also, to ensure that the exporters receive relief from the effects of the rising rupee in the true sense of the term, Mr. Subbarao pointed out that the impact of the tax paid on services used as inputs in manufacturing or processing of exports had also been factored into the duty drawback rates.

Sops for SMEs

Alongside, another package meant for all small enterprises and nine other sectors, he said, would have a revenue implication of Rs. 600 crore. This package, he said, pertained to concessional pre-shipment and post-shipment credit by banks for SMEs (small and medium enterprises), textiles, ready-made garments, leather products, handicrafts, engineering products, processed farm products, marine products, sports goods and toys.

Explaining the extent of relief under this package, Financial Sector Secretary Vinod Rai said that banks would now charge interest rate not exceeding the Benchmark Prime Lending Rate (BPLR) minus 4.5 per cent on pre-shipment credit up to 180 days and post-shipment credit up to 90 days on the outstanding amount till December this year.

“The enhanced rates of duty drawback would cover almost all products,” Revenue Secretary P. V. Bhide said. For instance, in readymade garments, the new drawback rate for knitted shirts would be 10 per cent with a cap of Rs. 48 a piece as compared to the prevailing rate of seven per cent with a cap of Rs. 31 a piece.

Likewise, the new drawback rate for grey cotton yarn of less than 60 counts will be 5.4 per cent with a cap of Rs. 11 a kg against the existing four per cent with a cap of Rs. 8 a kg. The drawback rate on toys has also been increased to six per cent from 2.1 per cent.

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