FTP review could extend DEPB; few other sops likely

Exporters struggling in the face of continuing demand contraction in developed markets could find some relief from...

Written by Ronojoy Banerjee | New Delhi | Published:August 20, 2010 2:30 am

Exporters struggling in the face of continuing demand contraction in developed markets could find some relief from the Foreign Trade Policy (FTP) review on Monday,but this could prove to be not up to their expectations. According to commerce ministry officials,the annual review of FTP 2009-14 would focus on a clutch of employment-intensive sectors which have been hit hard,including textiles,electronic goods,tea and man-made fibres. The sources,however,admitted that the packages under preparation in consultation with the finance ministry might not be enough to salvage these sectors entirely,due to budgetary constraints.

What seems certain is an extension of the Duty Entitlement Passbook (DEPB) scheme which expires in December 2010. This scheme is meant to neutralise the tax content in export goods. “We will take a call on the existing DEPB schemes. A time extension is possible,” a source said. He added that the government is also likely to allow free import of key inputs for the exporters of gems & jewellery.

“Sectors that have not shown major improvement could expect some relief. But the relief would not be a big chunk; it would be more of an enabler for trade,” the official said.

He refused to specify the exact quantum of the relief package.

Last year,commerce minister Anand Sharma had made key announcements to help exporters fight the downturn. The incentives were across a wide array of sectors ranging from garments and textiles to IT. “Since the last policy announcement (made on August 27,2009) several sectors have shown signs of revival. Exporters have done very well over the last six months,” the source added.

A top commerce ministry official had earlier told FE that the finance ministry had delayed the release of funds for export sops. Last year,under “the Chapter 3 scheme,the finance ministry had released Rs 1,350 crore as additional export sops to incentivise a handful of export sectors.

Former director-general of foreign trade RS Gujral recently told FE in an interview that the exports turnaround was due to a low-base effect and had voiced concerns over the appreciation of the rupee vis-a-vis dollar. After a 13-month decline,merchandise exports began showing signs of a turnaround from November 2009. In July this year,exports increased 13.2%,the slowest in the last six months,to $16.24 billion. Sectors like tea exports dipped 25%,handicraft exports 60%,tea 25% and readymade garments 23%.

Commerce secretary Rahul Khullar has repeatedly said that Indian exporters were not out of the woods and the economic crisis panning out in Europe could impact exporters. Earlier this year,WTO had predicted world trade to grow at an impressive 9.5% for this calendar year,but many trade analysts feel this is too optimistic a projection.

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