Revenue dept bats for export sops rollback

RUPEE SLIDE-1

At a meeting with exporters last week, senior revenue department officials questioned the need for the sops given that the rupee has depreciated over 4.5 per cent in the past two weeks, reaching Rs 42.51 to a dollar on May 16.

Sources in the know said revenue officials asked why measures like interest rate subvention on pre- and post-export credit should not be rolled back. It is hard not to see why the revenue department wants the sops rolled back. The subvention on export credit alone will cost the exchequer Rs 1,050 crore during 2008-09.

In reply, the exporters said recent rupee depreciation would not translate into any significant benefit for them as they had hedged the rupee at around 40 to a dollar.

Other exporters Business Standard spoke to said they would benefit from the depreciation of the rupee only if it stays at the current level for at least six months.

"The interest subvention is the only relief measure given by the government to counter the effect of the rising rupee. Most other measures like service tax exemption were in any case due to us (as taxes are not to be exported)," an exporter said.

Officials in the commerce ministry said they were yet to hear from the revenue department on the matter. "We do not know their stand on the issue. We believe at least three months are needed to monitor the impact of exchange rate on exports," said an official.

The export relief measure was initiated in July 2007 and covered nine sectors and all small- and mid-sized companies. Under the measure, interest rate subvention of 2 percentage points was provided on export credit up to December 2007.

As the rupee continued to appreciate, the government extended the scheme till March 31, 2008, and gave leather, marine products, textile and handicrafts an interest rate subvention of another 2 per cent.