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Exporters look for more sops

NEW DELHI: Last year Union Commerce and Industry Minister Kamal Nath announced that India’s exports had crossed the $125-billion mark, the figure that more than doubled in three years since the Congress-led United Progressive Alliance (UPA) Government took over in 2004. He also set an ambitious target of $160 billion for 2007-08 and $200 billion for 2008-09.

However, soon after the appreciating rupee vis-a-vis dollar started impacting the export sector, the Ministry of Commerce is forced to revise its export target for the current fiscal to $150-160 billion. In the past 16 months, the rupee has appreciated by 15 per cent against the dollar. It has not only impacted the profit levels of export-oriented units (EOUs), but also foreign buyers who are now looking for other cheaper options, pressing a panic button in Indian industry.

Though the stronger rupee is definitely helping imports, particularly crude oil imports which form the chunk of overall imports, dwindling exports might not augur well for the economy as it would lead to massive job loses. If the ambitious export target of $200 billion has to be achieved by the end of the next fiscal, some measures are needed to provide a cushion for the sector.

In the past few months, the Ministry of Finance and the Ministry of Commerce and Industry have announced some sops for exporters.

They are now anxiously looking forward to a favourable budget from P. Chidambaram, seeking concessions in taxes and duties and formation of some kind of cash reserve to tackle the present crisis, posed by stronger rupee.

The wish-list is long. The Federation of Indian Export Organisations (FIEO) is seeking a number of concessions for the export sector, particularly for the small and medium enterprises (SMEs) and the worst-hit labour intensive sectors like textiles, handicrafts and leather. The Federation wants tax incentives for the manufacturing export sector to move up the value chain and waiver of the Fringe Benefit Tax (FBT) so that the impact of the appreciating rupee could be minimised.

Besides seeking extension of income-tax benefits to all exporting units, whether merchant exporter or manufacturer exporter, the Federation wants basic customs duty exemption on capital goods imported under the Export Promotion Capital Goods (EPCG) scheme and rebate on duty paid on exported material.

Similarly, exporters want ambiguities removed while giving service tax refunds and its benefits be given to all those contributing to India’s exports.

Small manufacturers, who are either in the non-excisable sector or in the exempted category, have to bear the incidence of service tax paid during the course of exports. Exporters say levy of service tax affects competitiveness of exporting units and want that they be exempted from paying the same.

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