Govt to consider more export sops

APPRECIATING RUPEE TAKES ITS TOLL

The commerce ministry will soon approach the Cabinet Committee on Economic Affairs (CCEA) to approve additional measures to help employment-intensive sectors like textiles, leather, handicrafts and Export Oriented Units (EoUs) tide over losses owing to the strengthening rupee.

The proposal will be put up for CCEA consideration this week, officials familiar with the matter said.

This follows tax breaks that the finance ministry offered exporters in July, September and October to cope with the appreciating rupee. The rupee has appreciated more than 12 per cent against the dollar since April. It now stands at 39.29 to the dollar.

Commerce ministry officials confirmed that they will be pushing for a further increase in the Duty Entitlement Passbook (DEPB) scheme, for which rates were raised 3 percentage points in July for nine sectors including textiles. DEPB rates range between 5 and 6 per cent.

The ministry will also push for an increase in duty drawback rates, which were increased 3 percentage points in July and now stand at 8 to 9 per cent.

The ministry will also propose a reduction in export credit interest rates (currently between 8 and 8.5 per cent) and service tax reimbursement for additional services that exporters use.

The ministry had originally demanded service tax reimbursement in 17 areas, of which the finance ministry had agreed to seven in September and October.

A suggestion that the centre reimburses exporters state taxes as well is also under consideration. State taxes amount to roughly 4 per cent of the value of exports.

A recent commerce ministry analysis found that export growth in most employment-intensive sectors has dipped in the first six months of the 2007-08.

"In handicrafts, the dip is as high as 56 per cent and in various textile-related sectors the dip has been in the range of six to 22 per cent," an official said. Leather exports have seen a six per cent dip.

"Calculations have shown that for every Rs 1 crore of export orders lost, 35 jobs will go in the textile sector alone. Export realisations in the textile sector have gone down by Rs 4,700 crore in the past six months. These are terrible losses and are leading to job lay-offs," the official added.

Export growth in the past six months has largely been sustained by oil products, high-value engineering goods and gems and jewellery.

According to the latest trade data, merchandise exports in the April-September period grew 18.52 per cent to $72.28 billion, significantly lower than 27.51 per cent in the same period a year ago.

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The commerce ministry plans to push for a further increase in the Duty Entitlement Passbook (DEPB) scheme, for which rates were raised 3 percentage points in July for nine sectors including textiles.

It will also push for an increase in duty drawback rates, which were increased 3 percentage points in July and now stand at 8 to 9 per cent.

Proposals for an additional reduction in export credit interest rates and service tax reimbursement for additional services that exporters use are also on the anvil