Dumping weighs down exporters

Last week, the Union commerce ministry reported a fall of 24 per cent in exports during November, a twelfth month of a continuing decline. The situation calls for a sympathetic appreciation of the plight of exporters.

Obviously, the main reason is the contraction in global demand and consequent crash in commodity prices. Competing economies like China have been dumping goods to keep their factories running, at prices Indian exporters find difficult to match. It appears the position will continue for more time.

Meanwhile, exporters who have taken on an obligation under the duty exemption scheme and Export Promotion Capital Goods (EPCG) scheme are unable to fulfil these, even after the extensions allowed under the Foreign Trade Policy (FTP). Export Oriented Units (EOUs) and units in Special Economic Zones (SEZ) are also finding it difficult to maintain their net foreign exchange (NFE) earning commitment.

In 2002, the Directorate General of Foreign Trade (DGFT) decided to treat 2001-2002 as a blank year and monitoring of NFE of EOU and SEZ units was deferred for a year (between April 2001 and March 2002). In 2009, when the global financial crisis hit export demand, the government extended the export obligation period of all advance authorisation to 36 months. A similar initiative is called for today, when the trading environment is worse than it was then.

So, DGFT should extend the export obligation period of all advance authorisations by at least a year, without exporters having to seek any endorsements. Similarly, the export obligation period of all EPCG authorisations should be automatically extended by one year. DGFT should treat 2015-16 as a blank year, deferring the monitoring of NFE of the EOU and SEZ units. The export promotion councils and the Federation of Indian Export Organisations must represent the difficulties of their members effectively. Not doing so will mean many exporters getting declared as defaulters, any number of representations for policy relaxation, more battles to stay out of the 'denied entities list' and a lot of unnecessary paperwork.

Anup Wadhawan, the new DGFT, started off well by allowing benefits under the Merchandise Exports from India Scheme (MEIS) for shipments in April and May 2015 to all cases where exporters had inadvertently mentioned 'N' instead of 'Y' in the box meant to indicate claim of incentives in the shipping bills. Later, he extended the relaxation to similar cases for shipping bills filed till end-September. The MEIS benefit was also extended to more countries and more products. The government has made available the interest subvention scheme to select sectors with effect from April 1 and the Reserve Bank issued the necessary circular on December 4.

These helpful steps should be followed by an appreciation that timely relief must be given to exporters at a time when out markets are yet to see any significant revival in demand.

The medium-term strategy is in improving of productivity and increased market access. The commerce ministry has articulated these challenges in its FTP statement this April. However, short-term relief is necessary now.

tncrajagopalan@gmail.com