The Confederation of Indian Industry (CII) has presented a nine-point agenda on reversing the exports downtrend to the commerce minister and deputy chairman of the planning commission. Some of these suggestions make sense and some others are rather surprising.
The CII has demanded zero duty under EPCG (Export Promotion Capital Goods) scheme. The government should do it quickly as 3 per cent duty under the scheme gives barely a 4.5 per cent reduction as the basic duty on capital goods is 7.5 per cent. Lower duty on capital goods will lower the cost of investment and encourage taking up export obligation.
The suggestion to eliminate composition fees for extending export obligation period under advance authorisation scheme makes sense as it is only a question of giving more time and not any extra incentive. Additional incentives under the Focus Market scheme is also a good idea as the exporters have to more aggressively look for new markets in less developed countries for which direct sailings are not available.
The demand for income tax deduction for premiums earned on sale of DEPB for exporters with turnover of more than Rs 10 crore is also valid on the grounds of equity.
The CII has asked for service tax exemption for some engineering goods. There is a better case for lowering service tax rates across the board. Demands for additional 2 per cent interest subvention and further subsidisation of export credit guarantee premiums may help the CII popularity with its membership but may not come through.
The demand to help exporters recoup losses of over Rs 2,000 crore (as estimated by CII) in currency derivatives trading, on a no profit-no loss basis, is a bit bizarre. Exporters walked into the contracts hoping to make a killing and have lost their shirts. There is no case to bail out the greedy.
CII goes overboard in demanding enhancement in DEPB rates by 5 per cent across the board. The objective of DEPB scheme is to remit the duties/taxes on the inputs that go into manufacture of the export product. As it is, the exporters get DEPB rates that were enhanced to help them overcome har ships when one US dollar was equal to about Rs 39. Now, each US dollar fetches nearly Rs 50, but the DEPB rates have been retained at the same levels.
So, there is no case to enhance the rates further. There is a case to rebate the state levies on inputs but simply asking for 5 per cent reminds one of the knocks on the window glasses at traffic junctions. Such assistance would amount to ‘prohibited subsidies’ under the WTO disciplines.
The CII should ask money to be spent in making all the customs stations (Electronic Data Interchange) enabled. Exporters/Importers must be enabled to file shipping bills/bills of entry electronically. Administration of duty exemption/remission scheme must be only through customs, excluding the licensing offices altogether. The cap of 5,000 hectares land for setting up SEZs should be removed.
The RBI should delegate all powers for remittance of all export related payments to authorised dealers. Assistance to upgrade latest technology is justified. These are the types of suggestions that a responsible CII should pursue rather than ask for doles.
