Even as the Reserve Bank of India (RBI) has decided to withdraw the 4 per cent interest rate subvention benefit to the textile exporters from September 30, the Ministry of Textiles has proposed to the Union Cabinet that the scheme be continued till March 31, 2009.
The benefit was extended to Indian exporters in April. However, due to 12 per cent depreciation of the rupee against the US dollar since then, the benefit is being withdrawn from this month-end.
Last year, the finance ministry had allowed the subvention in export credit interest rates as the rupee was appreciating against the dollar. As a result, rupee earnings of exporters went down.
However, the textile industry has demanded extension of the interest rate subvention benefits as the industry has been suffering from various other problems such as high raw material costs and decreased demand from the US.
“Interest rates have gone up significantly and the cost of raw material is also an issue. We need to help our industry by backing it with the scheme till next year,” said a senior textile ministry official.
Industry bodies like the Confederation of Indian Textile Industry and the Northern India Textile Mills’ Association had earlier objected to the decision to hike minimum support price of raw cotton by 47 per cent for the next season.
“The finance ministry has taken its decision to withdraw the scheme looking at appreciating dollar in isolation without taking into account the increased cost of borrowing for the companies and the out of reach cost of the raw material like cotton” said DK Nair, secretary general, CITI.
The government had given the respite of 4 per cent interest reimbursement to the textile exporters in 2007 when the dollar had depreciated nearly 12 per cent. However, on seeing the dollar regaining its strength, the RBI issued a notice to withdraw this scheme from September 30 this year.
