The government on Thursday announced a Rs 1,400-crore package that included cheaper bank credit, an increased rate of tax refunds and faster reimbursement claims to help exporters worried by a strong rupee that has erorded their competitiveness.
“The enhanced rates of tax refunds through the Duty Drawback Scheme on nearly all products have been made effective from April 1 and will cost Rs 800 crore to the Central exchequer,” finance secretary Duvvuri Subbarao told reporters in New Delhi.
The government also announced concessional pre-shipment and post-shipment credit by banks for small and medium exporters and enterprises that export textiles, readymade garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys.
Banks will now charge interest rates not exceeding the benchmark prime-lending rate (BPLR) minus 4.5 per cent on pre-shipment credit up to 180 days and post-shipment credit up to 90 days on the outstanding amount till December 2007, Financial Sector Secretary Vinod Rai said.
Currently, banks charge interest rates not exceeding BPLR minus 2.5 per cent. The government will provide the requisite interest support of two percentage points to scheduled commercial banks. Subbarao said the amount of subvention will be calculated on the amount of export credit from the date of disbursement for pre-shipment and for post-shipment credit upto 90 days, whichever is earlier.
The subvention, as the partial subsidy is called, would be provided to the banks through the Reserve Bank of India, he said. “The Reserve Bank of India is being requested to issue a circular to the Scheduled Commercial Banks in this respect,” he said. Rai said this could involve a revenue outgo of Rs 800 crore for the government.
Subbarao said the Finance Ministry had accorded relaxation from monthly and quarterly ceilings of expenditure for reimbursement claims. “It is estimated that these claims are in the order of Rs 600 crore. These claims will be examined and fully reimbursed as expeditiously as possible,” he said.
“Reimbursement claims in respect of deemed export benefits are received and payments made by the Commerce Ministry, subject to monthly and quarterly ceilings on expenditure. Exporters had represented that these monthly and quarterly ceilings restricted their right to receive payments expeditiously. The Commerce Ministry had also requested relaxation from monthly and quarterly ceilings of expenditure,” he said.
The president of the Federation of Indian Export Organisations (FIEO), Ganesh Kumar Gupta, welcomed the announcement of increased duty drawback rates for most of the products.
He also welcomed the decision to reduce pre and post-shipment credit rates by further two percentage points for specified nine sectors of exports and all small and medium enterprises.