FIEO chief pitches for fixed exchange rate .

The Federation of Indian Export Organisation (FIEO) has voiced concern over the volatility the rupee undergoes against currencies of its major trading partners — the European Union and the US, impacting the exporters' earnings adversely.

Talking to Business Line here, the FIEO President, Mr A. Saktivel, said that just as India's competitors China and Bangladesh maintain, India should also try to maintain fixed exchange rate mechanism with US dollar at least for a year on an experimental basis so that the exporters reeling from under-recoveries of operations would get a breather. The fixed parity rate with the US dollar would help us some extent as the euro has weakened against the rupee, putting exporters in euro receipt at a disadvantage.

“Since our orders are booked 6-9 months in advance, exporters face a lot of problems. Once the dollar-rupee rates are fixed, we can boldly book orders so that we know what the profit is and what the margin is,” he said, adding that the Government might bear the cost of the fixed exchange rate mechanism to give relief to exporters.

Alongside, he said, the authorities should contemplate exercising some sort of control over foreign institutional investments (FIIs) to ensure that such inflows stay at least 18-24 months within the country so that the volatility of rupee is warded off “with fluctuations being nominal only”.

Interest subvention

With 2009-10 trade data out, he said, some sectors were doing well while some others such as leather, handicrafts, textiles were not so and the Government should continue with the interest subvention to these sectors at least by another year, besides extending this to other than small and medium enterprise (SME) sectors also. As the all-India duty drawback rate Committee is yet to come out with its recommendations, Mr Saktivel sought 3-4 per cent across-the-board hike in the all-India drawback rates so that the currency volatility loss would be recouped to some extent.

The FIEO chief also pressed for the overarching need to complete the electronic data interchange (EDI) wholly so that getting drawback, licences and bank guarantee releases on time would be ensured, sparing the exporters from the tedious task of running from pillar to post on these procedural problems.

He said in Chennai ports, mother vessel containers do not come in and only in Tuticorin ports such a facility exists and roads leading to all major ports in the country should be developed urgently.

He also sought excise and customs duty waiver on fuel supply to the manufacturing-exporters who use inverters so that their manufacturing cost would be brought down.

Apprehending the advent of base rate to be effective from July 1, as likely to raise the exporters interest cost, Mr Saktivel said that he met the Commerce Secretary, Mr Rahul Khullar, a few days ago and explained to him that the proposed base rate system should not be applicable to the exporters.

Yarn price rise

Asked about the yarn price rise, Mr Saktivel admitted that the country's $20 billion textile and clothing export is in danger and more so garments and knit-wear industries that rely on yarn as a major raw material. Despite ban on raw cotton export, compulsory registration coupled with revocation of the DEPB benefits as also duty drawback to yarn exporters, they could not get quality cotton and the mills were able to reduce yarn prices by only Rs 5 a kg and even some mills have stopped deliveries.

Even as mills make use of the opportunity to hike the price, the Government has done its best to make the user industries access to yarn easier. But there is no balance sheet as to how yarn export is being made. In the case of cotton, there is a Cotton Advisory Board taking stock of domestic demand, consumption and export trend periodically.

There is also a need for such a Cotton Yarn Advisory Board to regulate cotton yarn export.

In this context, he said that for the $20-billion textile export industry, a national fibre policy is still not yet devised, duly apportioning the role of cotton, yarn, man-made fibre in the overall value chain.

Source : Business Line