FIEO plea for sops at odds with govt view

About 10 days back, Commerce Minister Piyush Goyal said exporters should not be dependent on a depreciating rupee to stay competitive and, instead, they should stand on their own feet on the basis of quality of products and the ability to serve the needs of customers in the global markets. It would be interesting to see if he takes the same view on several demands of the exporters.

Last Monday, in a press release, the Federation of Indian Export Organisations (FIEO) gave detailed data and said contrary to general perception rupee depreciation is not providing much competitiveness as currencies of most of the countries are depreciating more steeply and therefore, there is a need to provide some other fiscal or non-fiscal support to help exports in this scenario. 

The interest equalisation scheme on pre- and post-shipment rupee export credit gives 3 per cent subvention to all MSME (micro, small, and medium enterprises) and 2 per cent subvention for manufacturer exporters and merchant exporters exporting under 410 tariff lines. The scheme was introduced in April 2015 initially for a period of five years but has been suitably tweaked and extended till the end of March 2024. FIEO says that with interest rates firming up, the MSMEs are getting credit at not less than 10-11 per cent. This is likely to go up further as the RBI is expected to increase the same again in October. However, with complete change in the situation, there is an urgent need to restore the interest equalisation benefit of 5 per cent to manufacturer MSMEs and 3 per cent for all tariff lines as cost of credit is equally hurting all exporters. The scheme should be extended to service sector also, says the FIEO press release. The FIEO wants liberal funding to exporters, at competitive cost, for promoting their brands and a scheme like the Services Exports from India Scheme (SEIS) for hotels, travel, and tourism and some other services sectors. Also, the government must operationalise the legal provisions made five years back for refund to foreign tourists of goods and services tax on their purchases in India and create a corpus for marketing services globally through different organisations/associations. 

The FIEO wishes the present export promotion schemes to continue and gives a number of suggestions to encourage e-commerce, research and development, digitization, rupee trade mechanism and so on. In particular, the FIEO wants clarity on whether the payments realised in rupees through Special Vostro Accounts will be treated on par with receipt of payments in freely convertible currencies for the purpose of getting export incentives.

It is difficult to understand why the exporters want the taxpayers’ money to further their businesses. There was a time when the exporters needed the government to support their activities. Now, the times are different. Most companies are reporting good profits. It is quite easy to raise capital through the equity markets and other sources. The banks have reduced their non-performing assets and have good enough balance sheets to readily lend to good proposals. Exporters can go to the markets rather than ask for government help. 

The plea of FIEO for fiscal sops to support exporters is at odds with the Commerce Minister’s call for exporters to stand on their own legs and focus on quality of products and services. We have to wait and see whether the government will walk its talk. 

email:tncrajagopalan@gmail.com