The Hindu Business Line : Exporters’ body looks to trim financing costs

With the global economic meltdown taking a toll on exports, the Federation of Indian Export Organisations (FIEO) has decided to take up the issue of high financing costs, estimated at nearly three times the global average, being borne by exporters with the Reserve Bank of India. The industry body is planning to seek the central bank’s intervention so that financing costs come down and exports from India become competitive.

According to Mr G.K. Gupta, President, FIEO, financing cost for exporters’ overseas works out to around 5 per cent, whereas the Indian exporter has to shoulder financing burden ranging from 11 per cent to 17 per cent, depending on the tenure for which funding has been availed from the bank.

“We are planning to take up the issue of Indian exporters being burdened with high financing cost with the central bank. At a time when exports are slowing, we need support. Else, more export-oriented units will go bust and there will be more job losses. All exporters should be able to avail themselves of funds at bank rate plus 100 basis points,” said Mr Gupta.

Pointing out that exports earn the country precious foreign exchange and also generate employment, the FIEO Chief said packing credit in foreign currency from banks was hard to come by.

Despite banks getting good inflows into their Foreign Currency Non-Resident (FCNR) deposit schemes, which have become attractive after RBI raised the interest rate ceiling on such deposits to Libor/Swap rates plus 100 basis points, exporters’ are finding it difficult to get packing credit in foreign currency.

Facing the brunt

Prominent among the sectors facing the brunt of global slowdown are export-oriented units in the textiles and gems and jewellery. It is estimated that textile firms may shed a further 500,000 jobs in the next five months, on top of the 700,000 already lost since June. Lakhs of employees of export-oriented gem and jewellery units in Surat too are at the receiving end, with many having to make do with 25-30 per cent wage cuts.

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