Govt's unfair treatment has forced us to lower growth target to 10%: Anupam Shah

Interview with Chairman, EEPC India

EEPC India (formerly Engineering Export Promotion Council) recently sent out a strongly-worded press release against the government's decision to cut back the duty drawback rates on engineering products. The council called the government move “irrational”. Anupam Shah, the newly-appointed chairman of EEPC India, speaks to Probal Basak about the council’s concerns. Excerpts:

 

Why are you so upset with the cut in duty drawback rate?

The engineering sector is in a terrible shape. We are one of the largest contributors to the country’s export basket. During the April-to-July period this year, we had a negative growth. In such a scenario, it was unfair for the finance ministry to cut back the duty drawback rates for over 3,500 products ranging between 25% and 40%.

 

It is affecting our margin. In many products, duty drawback was 2.5%. So, if the government has made it 1.6%, it has taken away 33% of duty drawback. People often work on a margin as low as 5%. The government decision is taking away that as well.

 

Large players like Tatas have got their own strong voices. But small players, which contribute to about 60% of engineering product exports, work on a very small margin. We have to deal with hundreds of challenges. Every now and then, the small benefits given to us are taken away like this. Earlier, export used to be remunerative, but now-a-days people feel the local market is more remunerative.

 

How do you see the year for the country’s engineering exports?

We could have achieved a higher growth, but now we are targeting a 10% growth. We are lowering target because of the irrational moves by the government. We believe in the current scenario, the government had to be committed to helping engineering sector export and reducing the current account deficit. I do not understand why engineering sector is being singled out, when it is one of the highest contributors to the country’s total exports.

 

What gives you the confidence to target 10% growth, despite a decline of 4.19% during the April-August period of FY14?

The export turned positive in August with 2.27% growth. September was good. The rupee devaluation helped to some extent. Also, export normally picks up from October onwards. Last year, total engineering exports were $56.7 billion. We are hoping to touch $63 billion (this year). The US government shutdown is a concern, but we are hoping it would not continue for long. We are also meeting government officials to make them aware of our concerns.

 

What kind of support are you seeking from the government?

We believe we are getting a differential treatment. I think one of the factors is that we do not have our own ministry, unlike the garment sector which has the textile ministry to take care of its concerns. We are a small part of the commerce ministry, which has to deal with hundreds of things and we are just one of them. There is a ministry for micro, small and medium enterprises (MSME) and more than 55% of engineering exporters belong to the MSME category.

 

We are asking for the creation of a Rs 500-crore technology upgradation fund over a period five years by the MSME ministry. It can support for technology upgradation as it is being done for the garment sector. We need an advocator, we hope MSME ministry will take care of our concern.

 

With the rupee stabilising at 62-level, how do you see the impact on exports?

Exporters do not benefit when rupee is volatile, even if it goes down to 68-level. If it changes every day, then exporters find it difficult to quote prices. We are happy that there is stability now and it is not changing every day drastically as it was doing last month. Also, if it is in certain bandwidth, the government should not be going out to make it stronger. Unless there are very excruciating circumstances, there should not be monetary support. Now it is stable, so there should not be any artificial effort to support the rupee.