THE string of sops provided by the finance ministry for exporters has failed to impress the commerce department which has urged the Prime Minister’s Office (PMO) to ensure that a note on export incentives, pending with the Cabinet Committee on Economic Affairs (CCEA), is taken up as soon as possible. The note emphasises the need to provide relief to exporters in the form of ad-hoc increases in tax reimbursement rates under the duty entitlement pass book (DEPB) and duty drawback scheme, full reimbursement of service tax and reimbursement of state taxes and levies. Further delay in implementation of the proposals could lead to more job losses — expected to be as high as two million this year — the department has warned.
The steps taken by the finance
ministry so far includes enhancement of DEPB rates by 3% for nine sectors and 2% for others, reduction of ECGC premia rates and service tax (refund/exemption) for exports in respect of 11 services. The rate of interest on pre- and post-shipment credit was reduced by 2%.
The commerce department, however, feels the move is just not enough to make a substantial difference to exporters facing a steadily-appreciating rupee. “The finance minister has just met a part of the demands made by us. We’ll go ahead with our CCEA note and ensure it is implemented,” an official said.
Commerce & industry minister Kamal Nath has shot off a letter to the PMO asking for quick action on the note. He also discussed in Lok Sabha on Tuesday the job losses in export units which have ceased to be competitive due to the falling value of the dollar.
The official pointed out that service tax exemption for exporters had been notified for just 11 services against 21 services consumed by exporters. Moreover, the demand for an ad hoc increase in DEPB rates and drawback rates to nullify the effect of the rise in the value of the rupee had also not been met.
The additional 2% interest subsidy — 2% subsidy was given earlier — offered by the finance ministry to exporters of leather, handicraft, marine products and textiles was not enough and more needs to be done, the official added.
The commerce department has also made a case for reimbursement of state taxes to exporters. According to Mr Nath, it is estimated that unless remedial measures are taken, the job losses could be as high as two million.
In the past 15 months, the rupee has appreciated against all the major freely-convertible currencies including the US dollar and the euro. The rupee recorded the highest appreciation during the first six months of the financial year against the dollar. The impact has been felt mostly in sectors where inputs are less import-driven, labour-intensive and with low value-addition like leather, textiles, handicraft and marine