Ministry plans sop for manufacturing exporters

NEW DELHI, MAR 6: The commerce ministry proposes to allow manufacturing exporters to furnish legal undertakings against the value of the export instead of bank guarantees. The move is expected to improve the liquidity position of exporters and reduce operating costs for the manufacturer. Currently, manufacturing exporters are at a disadvantage because they have to furnish a bank guarantee at a cost of roughly 3 per cent a year for two years. That locks up a huge amount of funds, forcing the exporter to borrow an equal amount at higher rates of interest, increasing his production and operational costs. If the exporters are asked to furnish only a legal undertaking, then the authorities will be free to attach their assets in case they fail to meet their export obligation.

The proposal has been made to the export promotion board, headed by the Cabinet Secretary, who will have to clear it. Commerce ministry officials are also scheduled to meet officials of the finance ministry next week to work out a package tocheck the general deceleration in exports since 1996.Ministry sources said the ministry has also proposed to reduce the interest rates on pre and post-shipment credit further for exporters to give a thrust to the growth rate which has been hovering at the below 5 per cent mark through the year.

According to the latest estimates the export growth for the year is likely to be only around 3 per cent, with the global demand for key export sectors falling. The market for gems and jewellery, which account for 15 per cent of India’s export basket fell 30 per cent during the year, most of it due to the currency crisis in the South Asian markets while agri-exports fell 15%.