These sections are now pinning their hopes on his final reply to the budget debate, expected in the next two days. As commerce minister B B Ramaiah told Business Standard :This is not a final reply. I am keeping my fingers crossed that something will come. The commerce ministry will intensify its efforts to help exporters.
Exporters, however, were more downbeat. Said Federation of Indian Export Organisation (FIEO) secretary general R K Dhawan: Exporters are clearly not a priority for the United Front government. This is a very short-term strategy.
Even the two exemptions that Chidambaram granted on MAT - to units located in industrially backward areas and sick units - are no more than restoring the status quo ante. The introduction of MAT in the budget had created an anomalous situation where two categories otherwise exempt from paying taxes - those in notified industrially backward areas and sick units - were now required to pay the MAT. Yesterday's announcement has removed these anomalies.
But even for these exempt categories, ambiguities remain. Hitherto, units in backward areas could choose any five-year block out of the first eight years for tax waivers. Thereafter, they were subject to applicable tax rates. Now, it is not clear whether the unit will pay MAT or the normal tax rates will apply after the exemption period is over.
Further, all backward area units do not stand to gain. Old units which may have already availed of the five-year exemption will have to pay taxes. It is only the new units located in backward areas that will gain since they could get the full five year exemption.
As Dhawan argued, the exemption of backward area units will not help exporters as most of the top exporters are established and, hence, would not qualify for the five year exemption.
Further, several large exporters are trading houses who do not manufacture in any case.