Export Credit Rates Cut To 9%
Union commerce minister Ramakrishna Hegde yesterday announced a reduction in interest rates on export credit from 11 to 9 per cent and extension of tax holidays for export-oriented units and units in export promotion zones from 5 to 10 years as part of a package aimed at reviving exports.
The government has also agreed to substitute legal undertaking for bank guarantees for the purpose of security for import of duty-free raw materials. This facility will be available to manufacturer-exporters with a record of specified export performance and more than a year of an unblemished export record.
This will not just reduce the cost to the exporter but also help him in augmenting working capital, the minister said while making a short announcement in the Lok Sabha. Justifying the decision, he said exports had slid 8 per cent in dollar terms in the first quarter of the current year and the trade deficit had risen to $2.1 billion, compared with $1.4 billion in the first quarter of the previous year.
Private software technology parks would be given the benefit of export promotion capital goods scheme. The bio-technology and small scale engineering industries will also be entitled to the EPCG scheme under the threshold limit of Rs 1 crore.
The commerce minister said export-oriented units would be permitted sub-contracting facility in domestic tariff area. EOUs exported goods worth Rs 11,000 crore, accounting for 10 per cent of total exports last year.
Elaborating on the reduction in interest rates from 11 to 9 per cent on pre-and-post shipment credit, Hegde said this facility would be available till the end of the current financial year.
This reduction was effected as the exporting community had cited high cost of export credit as a major reason for the difficult export performance which registered a negative eight per cent growth in the first quarter of this financial year, the minister said.
The government has also agreed to pay interest to exporters if government dues by way of duty drawback or refund of terminal excise duty is delayed beyond two months.
The two month period will be reckoned from the date of shipping in the case of duty drawback while it will be the date of payment of duty in the case of terminal excise duty.
Exporters will have to produce the prescribed documents within 15 days of export or deemed export to avail of this facility, which will come into effect from September 1, the minister said.
Manufacturer-exporters with a specified turnover will be permitted clearance of goods on the basis of self-certification. The necessary notification for lying down the procedure will be issued shortly, he said.
In his statement, Hegde said that nearly two-third of export items have reported positive growth.
But about 30 per cent of export items constituting 25-30 per cent of export basket in money terms, have shown substantial decline. These include cotton yarn and fabrics which has shown a decline of 20 per cent.
Export of readymade garments man-made fabrics have fallen 35 per cent and transport equipment 20 per cent. Hardware electronics has suffered the biggest decline of 60 per cent. Oil meals which used to be an important export item, has shown a drop of 50 per cent, the minister said. The commerce minister also indicated that a small group of officers of his ministry will draw up action points on the basis of suggestions comming from large business houses for enhancing their export turnover and resolving the problems faced by them.
Hegde began a process of inter-active discussions with business houses with a meeting with the S.D.Kulkarni, chief executive officer and another meeting with the Thapar group.
A government press release said that Kulkarni sought ECGC gaurantee and export financing for large projects, support for cement exports lest the fecilities built up by the company become infructuous. He also stressted the need to treat zero duty deemed exports on par with physical exports.