Exporters, stung by a persistently rising rupee, received big relief on Monday with the government deciding to extend benefits under the Duty Entitlement Pass Book Scheme (DEPB), which was to expire on Monday.
The objective of the DEPB scheme is to neutralise the incidence of customs duty on the import content of the export product. The neutralisation is provided by way of a duty credit against the export product.
Under the scheme, an exporter may apply for credit as a specified percentage of the freight on board (f.o.b) value of exports made in any freely convertible currency.
The credit is available against such export products and at such rates as specified by the Directorate General of Foreign Trade (DGFT). The scheme will now continue "till further amendments".
The move is welcome relief for exporters, who have seen a serious erosion of margins as the rupee gained 12 per cent on the dollar in 2007. Almost 70 per cent of India’s external trade is invoiced in dollars, forcing many to believe that the export target of $160 billion for this year is unlikely to be met.
An internal government survey has thrown up alarming data on India’s eroding export competitiveness. “Export prices of Indian products in 11 labour-intensive sectors have become 10-12 per cent uncompetitive on average against competing countries’ products due to the rupee appreciation,” the note said.