Budget 2020

Budget helps cut cost-of-credit, resolve pending issues of refunding taxes not under GST: Exporters

Abhishek Law Kolkata | Updated on February 01, 2020 Published on February 01, 2020

Ravi Sehgal, Chairman, EEPC

Sharad Kumar Saraf, President, FIEO

The Budget helps cut “cost of credit” while a new logistics policy can do away with infrastructure bottlenecks on the supply-side of overseas shipments, say exporters.

The two major exporter organisations, FIEO (Federation of Indian Export Organisations) and EEPC (an apex body of engineering export), have also pointed at attempts made in resolving issues surrounding remission of duties or taxes not integrated under GST.

‘’The Budget has addressed two important policy aspects for exporters: Nirvik Scheme to lower the cost of export credit and the remission of duties or taxes on export products for un-refunded taxes such as electricity duty and VAT,’’ said Ravi Sehgal, Chairman, EEPC India. According to Sehgal, the focus on manufacturing of medical devices through an Investment Clearance Cell will help enhance domestic capacity and exports. The duty increase could help curb cheap imports.

Cost of credit

Exporters refer to the ‘NIRVIK’ scheme as one that can help ease the lending process and enhance the availability of credit. The scheme comes at a time when there is fear of credit defaults (by exporters).

“To achieve higher export credit disbursement, a new scheme, NIRVIK, is being launched, which provides for higher insurance coverage, reduction in premium for small exporters and a simplified procedure for claim settlements,” Finance Minister Nirmala Sitharaman said in the Budget.

Under the scheme, the insurance over guarantee will cover up to 90 per cent of the principal and interest both on pre & post shipment credit. The ECGC (formerly Export Credit Guarantee Corporation Ltd) currently provides such a guarantee only up to 60 per cent of the loss to the banks. The premium for the coverage will also get reduced thereby benefiting MSME exporters.

This in turn is expected to enhance accessibility and affordability of credit to exporters, besides, lowering the provision requirement and liquidity due to quick settlement of claims ensuring availability of adequate working capital.

Refunds

Exporters welcomed the new scheme to provide digital payment of taxes that have not been integrated under GST (such as electricity duty or products & services).

Looking into issues of un-refunded taxes on petroleum products and electricity will help provide additional competitiveness to exports. It may also accentuate a move “towards zero rebating” (of exports).

“While the scheme will be rolled out during the next financial year, the fixation of rates for a large number of products will require an elaborate institutional mechanism. The scheme also has to be compatible with agreement on subsidies and countervailing measures of the WTO, so that exports are sustainable on a long-term basis,” said Sharad Kumar Saraf, President, FIEO.

One district, one product

The one district, one product can be a game changer for exports. Substantial exports can be targeted by focussing on the district level besides creating an export culture in India. Such a strategy will be extremely helpful for upliftment of artisans and craftsmen.

“However, the scheme should be supplemented by forming a District Exports Council on the pattern of the US to make it an active partner in exports,” Saraf added.

A national logistics policy along with district-level export hubs should give a boost to the sector. MSMEs will gain from initiatives such as e-Marketplace and a unified procurement system.

According to Sanjay Budhia, Managing Director, Patton Group, any interest equalisation should be made applicable for all exporters and not just MSMEs. This can go a long way to increasing the competitiveness of Indian exporters. He has also suggested that the the Foreign Trade Policy to be announced in April should look at creation of an Export Development Fund to help MSMEs.
"The marketing support initiative of Ministry of Commerce is very small to support exports over $ 535 billion. We should create an Export Development Fund with a corpus of 0.5 per cent of country’s exports for helping the MSME exporters," Budhia said.

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Published on February 01, 2020
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