Reduction in duty drawback rates worries exporters

Exports have grown over 50 per cent in the first five months of this financial year, but some players do not think the trend could sustain, given low duty drawback rates announced by the government in place of earlier Duty Entitlement Pass Book Scheme (DEPB) coupled with slackening external demand.

“The sharp cut back in the drawback rates for most exporting items at a time when world demand is slowing down... will have considerable impact in slowing down exports,” exporters have told commerce and industry minister, Anand Sharma, at a recent meeting.

The government ended DEPB scheme from October 1 this year, and replaced it with duty drawback rates.

The drawback rate has been capped at 5.5 per cent for most of the items.

Exporters also told him exports rose substantially during April-August period because exporters wanted to get benefit of DEPB scheme which expired in September.

“The high growth rates witnessed during the first two quarters was because the exporters wanted to utilise the benefit of the DEPB scheme,” trade bodies representing exporters, who used to avail the facility, said.

The exports data for September is yet to come, but they grew at 54 per cent during April-August despite headwinds coming from European Union (EU) countries and US—India’s largest trading partners. The EU countries constitute around 18 per cent and the US accounts for around 11 per cent of India’s exports.

Exporters also raised the issue of high cost of rupee export credit in view of the RBI’s tightening monetary policy. They requested Sharma for an interest subvention scheme.