2% export sop may stay
COMPANIES in the leather, textile, marine and handicrafts sectors may be in for some extended support. The government is likely to continue the 2% subvention in export credit for these sectors by another year in the forthcoming Budget. The current interest rate subvention facility is slated to expire by the end of March. There is a lot of pressure on the finance ministry to extend the sop as exporters of the identified sectors are continuing to feel the pressure of an appreciating rupee. Though the finance ministry was initially against extending the scheme, it has also veered around to the view that exporters in these sectors need to be supported for some time. The recent rate cut by the US Fed is expected to mount pressure on the rupee and the government does not want to take any chances, particularly in a year which will witness elections in 10 states. The sectors most hit by the rupee appreciation are job-intensive sectors like handicrafts, leather and textiles. The interest rate subvention for the four sectors will continue to be subjected to pre-requisites. The interest rate should not fall below 7%, which is the priority lending rate for agriculture, following the subvention. The average export credit interest rate ranges between 9% and 9.5%. Ministry sources said all four sectors had witnessed negative growth in exports during the current fiscal. While certain sectors of the leather industry, like footwear, continued to grow marginally, other sections of this employment-intensive business suffered a set-back in the first three quarters of the fiscal. It seems unlikely that the exporters’ demand of extending the interest rate subvention to other sectors will be met. “The four sectors already getting the benefit have been identified as the ones which need to be supported the most. The government does not have the resources or the inclination to provide the sop across the board,” an official said.