The government intends to give an incentive package worth Rs 1,500-2,000 crore as part of the annual review of the Foreign Trade Policy (FTP) 2009-2014.
Exports are set to register a decline this financial year, compared to last year. Lower costs for credit, full rebate on duties and taxes and reduction in transaction costs are some of the top items in the government’s agenda for the supplement to the FTP, to be announced in the first week of April.
Exports have been in rough waters since the financial downturn in developed markets started in 2008. However, shipments from India were still able to register a positive year-on-year growth. This will be the first financial year since the recession when exports would see a fall compared to the previous year.
“We are looking at the (export) numbers and what is very disturbing and challenging is that we have not even reached where we were before (in 2011-12), $306 billion,” Commerce and Industry Minister Anand Sharma said during the Board of Trade meeting on Friday.
In 2012-13, he said, the trade deficit might reach a record level of $193-196 billion. In FY12, it was $185 billion. “This is not a small number. Every institution must ensure faster movement,” said Sharma.
As part of the Rs 2,000-crore package, the government was expected to enhance the duty drawback rates by at least three per cent, a senior official told Business Standard.
In the Budget for 2013-14, the government has allocated Rs 4,413 crore for export promotion, of which Rs 2,897 crore is non-plan expenditure and Rs 1,516 crore is plan expenditure.
“Exporters had been facing major loses ever since the government withdrew the DEPB (Duty Entitlement Passbook Scheme) and replaced it with duty drawback rates. Exporters are losing almost two per cent of their export value,” said Sanjay Budhia, chairman of the Confederation of Indian Industry’s National Committee on Exports and Imports and managing director of the Kolkata-based Patton Group.
Under the DEPB, discontinued with effect from October 1, 2011, exporters were compensated for the Customs duty they paid on shipments.
Besides, the government is expected to give incentives for the engineering and textiles sectors, which have seen a massive fall this year, in the form in interest subvention. During April-January, export of engineering products, gems and jewellery, textiles and petroleum products declined by four per cent, 10 per cent, eight per cent and four per cent, respectively, due to a massive slowing of demand in the American and European markets.
“We have asked the government to introduce a new scheme of increasing garment exports to a level of $30 billion in the next three years, by allowing man-made fabric and cotton speciality fabrics at a flat five per cent customs duty on only 10 per cent of export performance realised in the previous year on garments. This way, we will be able to regain the lost market share and secure jobs,” said A Sakthivel, chairman, Apparel Export Promotion Council.
During April 2012-February 2013, exports reached $266 billion, representing a four per cent fall over the $277 billion achieved in the corresponding period of the previous year. Hence, to reach last year’s figure of $305 billion of total exports, these would in March alone have to be close to $40 billion.
Last year, during the FTP review, the government had actually set an export target of $350 billion for 2012-13.