Just not enough, gripe exporters

Want specific and immediate relief measures to stem slide in shipments; complain of lack of action on pre-Budget suggestions

Exporters, while waiting for the global downturn in commodities to pass, feel the government could have done more in the recent Union Budget to stem the continuous slide in export.

Merchandise export fell in January for a 14th month in a row. Major foreign exchange earners such as petroleum products and engineering items continue to contract, due to softening prices and subdued demand globally. Trade experts warn against optimism for February, too, with China’s services and manufacturing growth in decline.

While the recent Budget scores on socio-economic and infrastructure spending, plus more ‘ease in doing business’ the Federation of Indian Export Organisations (FIEO) is disappointed at the lack of immediate relief. Only widening the scope of duty drawback and the promise to continue supporting exporters through earlier declared incentives like interest subvention and the Merchandise Exports from India Scheme (MEIS) was not enough, it said.

For small and medium enterprises, which currently enjoy no additional fiscal benefit under the Foreign Trade Policy (FTP), FIEO had suggested fiscal incentives, apart from proposing tax benefits to exporters for creating jobs.

Engineering
Trade experts have called for more policies which address specific concerns. Engineering exports, 23 per cent of merchandise shipment in January, have fallen to 19 of the 25 top countries India send such goods to. Of the 33 broad engineering products, 22 recorded a contraction.

Engineering Export Promotion Council (EEPC) president T S Bhasin has said while the government is betting highly on improving of domestic demand and consumption, exporters needed it to focus urgently on specific reforms involving the cost of doing business. In its pre-Budget consultative meeting with the finance minister, EEPC had proposed the corporate tax rate be brought down to the current rate at which Minimum Alternative Tax (MAT) is charged, 18 per cent. The government wants corporate tax to be reduced to 25 per cent while other tax benefits are cleaved. Alternatively, EEPC had suggested the income from exports be taxed at the level of MAT. The issue of providing income tax exemptions on profits derived from transfer of incentive scrips like MEIS allowed under the FTP, an issue raised by EEPC and other major sectoral bodies, is yet to be taken up by the government.

However, EEPC has welcomed the proposed changes to the Customs Act to allow deferred payment of duties for importers and exporters with a proven record. The Customs Single Window Project, to be implemented at major ports and airports starting from the next financial year, has also been welcomed.

The engineering sector had also wanted a Rs 1,000-crore fund from the government for raising operational efficiency and improving business infrastructure, along the lines of the Technology Upgradation Fund Scheme (Tufs) for the textile sector.

Textiles
Incidentally, despite Tufs and measures such as continuing of duty-free import of input goods being announced in the Budget, textile exporters are miffed. And, not only because the finance minister didn't mention the industry even once in his speech.

Textiles are 11 per cent of all merchandise export and the second largest employer in the country, after agriculture. Exporters have repeatedly warned of Indian goods losing competitiveness in the global market as compared to those from Bangladesh, Pakistan, Cambodia, South Korea and Vietnam.

R K Dalmia, president, The Cotton Textile Export Promotion Council, said: “Preferential trade access being given to competing nations by major importers like the European Union and the US, beside discriminatory import duties on Indian goods in important markets like China and Canada, are severely affecting the industry.” Talks on free trade agreements with the EU, Australia and Canada to remove trade barriers are progressing tardily.

On the Budget proposals, the industry has mixed reactions. The two per cent excise duty on branded readymade garments have been questioned by exporters as unnecessary when the government is pushing the goods and service tax amendments. On the other hand, the announcement of an additional one per cent FOB value of exports duty-free for specified fabrics has allowed garment exporters to estimate additional shipment of Rs 7,500 crore.