The Hindu Business Line : Exporters make a case for cheap dollar credit

The Union Minister for Commerce and Industry, Mr Arun Jaitley (third from left), addressing exporters in an Open House Meet organised by the Federation of Indian Export Organisation (FIEO), in Chennai on Saturday. Also, Mr L. Mansingh, Director-General of Foreign Trade, Mr A. Sakthivel, Chairman, FIEO (Southern Region), and Mr Rafeeque Ahmed, President, FIEO, are seen. — Shaju John

Chennai , Jan. 3

AN irate exporter denounced the banks for what he called "Robinhood complex in the reverse"— take from the `poor' and give to the `rich'.

"We are exporters; we earn our dollars," he said. But the banks take the dollars and lend them to large companies. Consequently, when exporters want cheap dollar credit, they are denied, although they were the ones who got the dollars in the first place.

This issue was raised by some exporters at the Open House Meet between the members of the Federation of Indian Export Organisations (FIEO) and the Ministry of Commerce.

Exporters want the Reserve Bank of India to release foreign exchange out of the country's $100-billion reserves to the banks, so that they can lend out of those funds to exporters.

A dollar loan is cheaper at between 2 per cent and 3 per cent, whereas even rupee credit, even with the mandatory concessional rate, works out to around 7 per cent.

When the rupee is appreciating against the dollar, eating away exporters' margin, cheaper credit would be of a critical help. However, the RBI has refused to release foreign exchange out of the reserves for this purpose.

Nevertheless, the exporters' lobby has not given up hope. The Union Commerce Secretary, Mr Dipak Chatterjee, will meet the RBI Governor shortly to discuss this issue.

The Commerce Minister, Mr Aruj Jaitley, admitted that the rupee's appreciation was hurting exporters, but said he was not "alarmed" about it.

Speaking to presspersons after the Open House, Mr Jaitley observed that some industries such as textiles and marine products were more affected than others, but noted that the country's exports were still growing.

But in contrast, the FIEO feels that the rupee's non-stop rise is "frightening, and poses a direct challenge to the competitive pricing of Indian products."

"Exporters are lectured to go in for hedging the foreign exchange risks," the FIEO notes in a background note prepared for the Open House. But it is not the (hedging-savvy) large exporters who are affected by the rupee rise.

"It is only the small and medium exporters who are facing a nightmare on account of the appreciation of the rupee."

The organisation concedes, "The appreciation of the rupee is a welcome factor, at the macro level."

Indeed, the Chairman and Managing Director of Indian Oil Corporation, Mr M.S. Ramachandran, said here in another forum on Friday that the company had become a net interest earner, because more than half of its Rs 10,000-crore debt was overseas debt.

Another example is that of the Chennai-based Sundram Fasteners which has also similarly become a net interest earner.

But small and medium exporters, who do not have large overseas borrowings, are hurt.

Says Mr K. Vidyashankar, Managing Director of the Rs 100-crore M M Forgings Ltd, "If the rupee continues to rise like this, no exporter in this country can make any profits on exports."

What would such companies do? M M Forgings has no problems in getting cheap dollar loans — at 2 per cent! But the soaring rupee has still hurt. The rising steel costs have made matters worse.

Mr Vidyashankar sees relentless cost reduction as the only means of sustaining profitability.

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Exporters make a case for cheap dollar credit