New Delhi: In yet another booster dose to support exporters, the commerce ministry on Tuesday incentivised overseas sale of 2,000 goods and also made exports to China and Japan eligible for government support. The measures will cost the exchequer about Rs 450-500 crore in the months up to March, 2010.
The sops were announced to add momentum to exports, which after remaining in the negative territory for 13 months ending October, 2009, registered growth in November and December. Exporters would be eligible for the incentives with retrospective effect from January 1, 2010.
“We hope these incentives will give a further boost to exports and will also help in recovery of the sectors which continue to show decline in exports,” commerce minister Anand Sharma said while releasing the sops.
Significantly, the measures were released about month and a half ahead of the Budget, scheduled to be presented by finance minister Pranab Mukherjee on February 26. Many fiscal stimulus measures, including that for exports are expected to be clawed back in an attempt to manage the 16-year high fiscal deficit of 6.8%. Sharma called for a calibrated withdrawal of fiscal stimulus measures. “Many sectors still need support,” he said.
The latest incentives are in addition to the ones that the commerce ministry had released in August, 2009, while releasing the five-year Foreign Trade Policy. Officials from the Department of Commerce and the Directorate general of Foreign Trade have been conducting sectoral analysis to ascertain the impact of previous measures. Sectors that have been given incentives in the latest package are the ones that did not show signs of improvement. But sectors like man made yarns have mostly been insulated from the impact of the economic crisis, while petroleum products, plastics and gems and jewellery have shown recovery, the sectoral review revealed.
A key measure in the latest export sops is the inclusion of Japan and China in the list of countries that are eligible for 2% duty free scrips under the market linked focus product (MLFP) scheme. Exporters would be able to use the scrips to pay import duties for inputs used in manufacturing export goods. These scrips also can be sold to other exporters.
China has a share of 5.1% in India’s merchandise exports basket, the third highest after United Arab Emirates and United States. Japan is also an emerging export destination for Indian goods and both the countries are negotiating a duty free trade agreement to increase bilateral trade. India has large trade deficits with both the countries.
Exporters would be able to export 1,837 products, including auto components, three wheelers, and earth moving equipment under the MLFP scheme. Moreover, 113 new products, including sewing machines, nuts, bolts and crews have been eligible for 5% duty free scrips under the special focus product scheme. Also, exporters of 112 products would be able to enjoy 2% duty free scrips.
Welcoming the measures, exporters demanded that similar incentives should be extended for exports from other sectors. “The government needs to extend Market Linked Focus Product Scheme to Garment sector also for export to EU and US as these markets are still not showing much improvement and Indian exporters need to continue in the market with aggressive pricing,” said A Sakthivel, president, Federation of Indian Export Organisations.
In addition to the export incentives, the commerce ministry is in talks with its finance counterpart to extend the scope of cheap and subsidised export credit. The demands include reducing the interest of dollar credit to Libor plus 1%, from the current level of 3.5%. Moreover, the commerce ministry has also requested for continuation of the 2% interest subsidy given on export related credit as well as inclusion of engineering and chemical sector for interest subsidised export loans
Source : Financial Express