The Hindu Business Line : `Unveil exchange stabilisation plan to lessen impact of rising rupee'

Exporter-friendly
Government must ensure that banks fulfil the task of 15 per cent export credit disbursement
50 per cent of total credit given by banks must be earmarked exclusively for SME exporters
RBI must come out with special packing credit scheme and give it to scheduled commercial banks

Kolkata June 21 The Engineering Export Promotion Council (EEPC) has suggested that the Government, for minimising the rupee appreciation (at the current level of Rs 40 to a dollar) impact on exporters, should formulate duty neutralisation schemes, and also take various steps, including reduction in value addition norms from 50 per cent to 25 per cent for engineering items with respect to the DEPB (Duty Entitlement Passbook) Scheme.

The Council has also sought enhancement in duty drawback rate by 1.5 per cent across the board for all engineering items, issuance of the much delayed service tax exemption notification for tax paid on post-production export of goods and formulation of state-level drawback scheme for state levies.

Briefing newspersons here on Wednesday, Mr Rakesh Shah, Chairman of EEPC, said: "on the export credit front, we have suggested that the government should ensure that banks fulfil the task of 15 per cent export credit disbursement, and in case the target is not met, some penalties should be levied on the banks." He said at least 50 per cent of the total export credit given by the banks should be earmarked exclusively for the SME exporters.

It is further suggested that the RBI should come out with a Special Packing Credit Scheme, which could earmark $20 billion out of the $200-billion forex reserves, and give it to the scheduled commercial banks with refinance facility, so that banks do not have cost issues for disbursing the credit to SME exporters.

Exchange stabilisation

Mr Shah suggested that the Government, in consultation with the RBI, should come out with an Exchange Stabilisation Scheme, which can compensate a portion of the loss suffered by exporters on account of rupee appreciation.

Explaining further, he said, say 20 per cent of the difference between the rupee-dollar rate in every quarter this year with the average exchange rate of the last three years could be given as exchange rate stabilisation compensation with a value for each exporter.

Asked how misuse of the facility can be prevented, Mr Shah said each such payment could be tallied with the PAN /IEC Code and RCMC (Registration-Cum-Membership Certificate) numbers of exporters/companies who receive such compensation.

NFEE percentage

According to Mr Shah, another variant of the scheme would be to compensate exporters a "pre-determined percentage of net foreign exchange earned (NFEE) every quarter". The percentage, he felt, could vary depending on how the rupee appreciates against the dollar from an average reference rupee-dollar exchange rate for the last three years.

The Council has also urged the Government to look at the possibility of imposing a kind of levy (like a Tobin tax) at a rate between 0.1 and 0.25 per cent on forex inflows, as a way of supporting the above exchange rate stabilisation scheme.

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