FIEO Moots High-Level Committee for Exports
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Mr.Ganesh Kumar Gupta, President, FIEO (front row 5th from left) addressisng the Press conference. On his left is Mr. A Sakthivel, Vice President, FIEO with other Members of the FIEO Managing Committee, and Director General of FIEO. |
At a press conference organized by FIEO at New Delhi on 1st October, 2007 Federation President Mr. Ganesh Kumar Gupta called for setting up a high-level committee headed by the Prime Minister to deal with the issues concerning exports. Referring to lackadaisical response of the Finance Ministry towards implementing the relief package announced by the Commerce Minister in June, he said, many vital issues concerning exports remained neglected due to inter-ministerial differences and lack of coordination between various governmental agencies. "A Committee headed by the Prime Minister and having members such as Commerce & Industry Minister, Finance Minister, Textile Minister, RBI Governor, Deputy Chairman of Planning Commission, Chairman of PM’s Economic Advisory Committee and chiefs of various export organizations, would expedite the decision making process on issues concerning exports," he said.
FIEO President strongly pointed out that the profitability of the exporters was being eroded due to constant appreciation of rupee and expressed concern over its possible future appreciation as well. Looking at the massive inflow of US dollars through ECB and portfolio investment routes, said Mr. Gupta, US dollar may touch Rs. 38 by the year end. He cautioned that if Indian exporters kept on losing their buyers, they would not be able to regain them later and eventually bring down the overall export statistics of the country.
Mr. Gupta further warned against the impact of slowdown in exports on industrial production and said "commercial data records a decline in industrial production from 13.2% in July 2006 to 7.1% for the same month this year." Mr. Gupta called for immediate reduction in prime lending rate by 100-125 basis points to help reduce interest burden on the industry and boost industrial production.
FIEO Chief categorically pointed out that the June package to offset the impact of appreciating rupee on exports was largely unimplemented and exporters had by far got only marginal benefits. "Revised drawback rates don’t reflect consideration of stronger rupee; the service tax benefit is also confined to only few services leaving a host of other services outside the ambit of refund; and no decision has been taken to make EEFC account interest bearing;" he said. Mr. Gupta also referred to the delay in providing supplementary drawback and said that minor modification in the software used by customs could avoid such unnecessary procedural delays.
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Extending his demands, Mr. Gupta sought complete exemption of various taxes borne by exporters such as service tax and VAT. According to him, refund process adds to the transaction cost of exports without adding any revenue to the national exchequer. Meanwhile, FIEO Chief also suggested that the exporters on their parts should explore the possibility of invoicing in other currencies or in Rupee and use hedging option to safeguard against the losses on account of volatility in exchange rates. He urged the exporters to explore new markets and upgrade their products by adding more values. Commenting on an observation made by Mr. Gupta that exporters should diversify into new markets, a Past Prescient of the Federation Mr. Rafeeque Ahmed said that leather exporters were already maneuvering to shift their focus towards European markets to evade the cascading effect of weakening dollar. At the same time, he observed that many leather exporters like him were deferring their capacity expansion plans in view of the rupee going up. |
Dr. R. K. Dhawan receives Niryat Shiromani Purskar |
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Dr. R.K.Dhawan, Chairman (NR), FIEO received ‘Niryat Shiromani Purskar’ and ‘Gold Medal’ at an Award Ceremony organized by Indian Council of Small & Medium Exporters (ICSME) on October 16, 2007 at New Delhi. Dr. Dhawan received Gold Medal on behalf of Eastman Industries Ltd., Ludhiana for outstanding performance in the field of exports. |
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Dr. R. K. Dhawan receiving the Award from Mr. M. C. Bhandare, Governor of Orissa. Others from left are: Dr. Bhishma Narain Singh, Former Governor of Assam & Tamilnadu; Dr G.V.G Krishnamurthy, Former Election Commissioner of India. On extreme right: Mr. H.P.Kumar, Chairman & Managing Director, NSIC. |
The Vice President of the Federation, Mr. A Sakthivel, who is an exporter of apparel and knitwear items, said that apparel exporters were looking at exporting more value added products, like those with embroidery, to ensure that the margin pressure on run-of-the mill products did not affect their overall profitability. Besides, said Mr. Sakthivel, his fellow exporters in Tirupur were trying to venture into new markets in Australia, New Zealand and Japan in order to reduce dependence on dollar invoicing. "We are learning about currency swaps and options to hedge our risks, however, some urgent steps should be taken by the government to ensure that the workers were not losing jobs due to appreciating rupee," he observed. According to his estimates, around 7,000 workers had lost their jobs in Tirupur apparel export industry alone.
As a measure to offset the impact of appreciating rupee, the Northern Region Chairman of the Federation, Dr R K Dhawan called for dual exchange rate mechanism which was in place in 1991. He also called for setting up a kind of hedging corporation to disentangle exporters from volatility in exchange rates.
The consistently rising rupee has also thrown financial calculation out of gear for exporters since the bulk transaction terms are normally done on a six months to a year basis. Mr. O. P. Garg, Immediate Past President, FIEO said, "Export contracts are mostly done on yearly basis with payment terms ranging between six months to one year. And given the constantly fluctuating rupee value, I do not know what will be paid to me six months down the line on the goods sent today."
Mr. T V Murthi, President, Indian Silk Promotion Council, lamented, "A year ago, we were telling our international buyers that rupee will stabilize around 41 level and this will be the benchmark. But rupee has gone down significantly than the level we were quoting. And it has created several anomalies in our business plans".
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Press Conference in progress. |
