Hike in duty drawback rates won't help much, say exporters

Demand the govt should take more concrete measures to stem the fall in exports

Exporters are not impressed by the Centres' decision to increase duty drawback rates for merchandise exports of certain products. Terming the move a 'temporary measure', exporters have demanded the government should take more concrete measures to stem the fall in exports.

Exports stood at $21.35 billion in October 2015 - a 17.53 per cent fall on a year-on-year basis. On Monday, the government had raised the duty drawback rates by two per cent for many sectors including engineering, marine and textiles. Besides, two weeks ago, the government had announced a revamped merchandise exports from India scheme (MEIS) for 110 additional products.

Reacting to these developments, Ajay Sahai, director-general, Federation of Indian Exports Organisation, said more should have been done to lift exports.

The drawback rates are reimbursement of certain customs and excise duties, and service tax on imports of input materials, which go into the manufacture of goods that are exported.

According to Sahai, exporters have not been able to take full advantage of duty drawback. While exporters have applied for drawbacks to the Directorate General of Foreign Trade, many have not claimed the same from the customs department, he noted.

While deciding on new duty drawback rates, Sahai said, the government did not take into account the additional 20 per cent safeguard duty imposed on hot-rolled steel, which would adversely affect smaller firms.

Exporters are also not happy about the revamped MEIS, saying they have not been able to fully benefit from the scheme. While many ports, including India's largest container terminal at Navi Mumbai, are not properly following the procedures related to MEIS, lack of clarify about the procedures has also accentuated the problem.

Devendra Pant, chief economist at India Ratings, said, "In the wake of falling global demands, duty drawbacks as well as recent government reforms in boosting exports will have little long-term effect."

While the government announced an increase in duty drawback rates and new MEIS, it was silent on restoration of interest subvention demanded by exporters.

According to Pant, interest subvention will only change the top line of manufacturers.
DRAWBACK RATES AND EXPORTS

• Drawback rates are reimbursement of certain customs and excise duties, and service tax on imports of input materials, which go into the manufacture of goods that are exported
   
• On Monday, the government had raised the duty drawback rates by two per cent for many sectors
   
• The government is silent on restoration of interest subvention, as demanded by exporters