Remove levy, reveal RBI probe findings, demands FIEO chief

MUMBAI, Dec 18: The Reserve Bank of India's latest measure to strengthen the rupee has met with strong resistance from exporters. By slappi...

MUMBAI, Dec 18: The Reserve Bank of India’s latest measure to strengthen the rupee has met with strong resistance from exporters. By slapping a minimum levy of 20 per cent interest surcharge on export bills, the RBI has unnecessarily penalised hundreds of small and medium exporters, according to Ramu Deora, president of the Federation of Indian Export Organisations (FIEO).

“Why should the RBI blame exporters for excessive speculation in the forex market? Every day the RBI is coming out with new measures… we don’t know what’s in store for us tomorrow. RBI should find out and reveal who is holding back dollars abroad,” Deora told The Indian Express.

Regarding the volatility in the forex market, Deora said banks and corporate houses were speculating in the market. “Instead of blaming exporters and penalising them with additional levy, RBI should investigate and find out who is misusing the system. Action should be taken against those responsible for the high volatility in the market,” he said.

Continuing his attack on the RBI measures, the FIEO chief questioned the central bank’s authority in making structural changes in policies at this juncture. “The RBI shouldn’t have taken major policy decisions when a caretaker government is ruling the country and elections are round the corner,” Deora said. He said the RBI should reveal the outcome of its investigation of eight banks involved in major forex speculation. “It should come out with the contents of the investigation and names of people who misused the system,” he said, urging the RBI to withdraw the measures announced on Wednesday.

In a bid to boost inflow of funds and strengthen the rupee, theRBI on Wednesday clamped a minimum levy of a 20 per cent interest surcharge on overdue export bills and a 15 per cent interest surcharge on bank credit (excluding interest tax) for imports. “As the new levy will be calculated from day one, Deora said, exporters will end up paying the additional duty due to various factors. Inevitably, due to reasons beyond one’s control there can be small delays.

“Normally small exporters –who account for almost 60 per cent of exports — are not in a position to retain their export earnings abroad as they have to pay bank interest in India, salaries, purchase cost and so on,” the FIEO chief said, adding that such steps will not help in reviving export growth.

FIEO is planning to take up the issue with the RBI Governor.On the value of the rupee, he said the RBI deputy governor Y V Reddy had gone record four months back saying that the rupee was overvalued by 14 per cent. “It has already depreciated by 11 per cent. The ideal level should be around Rs 42,” he said.