Not in the interest of exporters
No Confirmation On Extending Interest Subvention On Pre- And Post-Shipment Credit, DEPB May Hurt IT APPEARS to be the season of uncertainty for exporters. Not only is the future of the duty entitlement pass book scheme unclear, exporters are also not sure whether they will be allowed to enjoy the interest rate subvention on pre-shipment and postshipment credit provided last year beyond March 31, when it is scheduled to lapse. Although the commerce department is pushing hard for extension of the relief on the ground that the rupee is expected to appreciate further, creating more trouble for the exporting community, there is no firm indication yet from the finance ministry on whether it is prepared to go along with the request. Speaking to ET, official sources said the commerce department has prepared a Cabinet note on extending interest rate subvention to exporters for some more time. “Although the value of the rupee against the dollar is hovering around 40, it is just a temporary phase and the rupee is expected to strengthen to around 37 against the dollar by the end of the year,” an official said. Moreover, with the slowdown in the US economy taking the shape of a recession, spending is expected to be low in that country. All these factors together paint a not-too-bright picture for exporters in the coming months, especially for certain labour-intensive sectors like textile, handicrafts and leather, the official added. In July last year, the government announced a relief package for exporters which included subvention in the rate of interest on pre-shipment and postshipment credits by 2% from April 1 2007 to December 31 2007 for nine sectors and all small and medium enterprises. The nine sectors were textiles (including handlooms), readymade garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys. Later in October, four more products — jute and carpets; cashew, coffee and tea; solvent extraction and deoiled cake and plastics and linolen — were added to the list of export sectors eligible for interest subvention. In November 2007, the government, in recognition of the fact that leather, handicrafts, marine products and textile sectors were particularly hard hit by the appreciation of the rupee in view of its low import intensity and large value-added features, decided to provide an additional subvention of 2% on interest rate for the sectors over and above the 2% already provided. The total subvention was subject to the condition that the interest rate, after subvention, will not fall below 7%, which is the rate applicable to the agriculture sector under priority lending. The government also decided to extend the subvention scheme by another three months till March 31 2008.