Coming, additional export incentives for select industries

Exporters of garments, chemicals and pharmaceuticals can look forward to some additional sops soon.

The Government is working on a small package of incentives for select sectors to help exporters tackle the difficult global market.

The package, which is likely to include a bonus amount for garments and chemicals exports to Europe linked to the value of shipments, is awaiting clearance from the Finance Ministry.

The Commerce Ministry has also proposed reimbursement of registration fees for pharmaceutical exporters.

It is important that exports, which have posted sluggish growth so far this year due to continuing slowdown in the Western markets, get back on the growth track to keep the widening current account deficit in check.

“Discussions are on with the Finance Ministry and a nod is expected soon. But it remains to bee seen whether all the demands are accepted because of the fiscal constraints,” a Commerce Department official told Business Line .

The Finance Ministry’s focus on keeping the fiscal deficit in control is the main reason why the size of the package is small. Other products would have to wait till the new Government assumes office and announces the annual Foreign Trade Policy for the year.

But this could take a few months as the General Elections are due not before mid-April.

“The idea is to give incentives to items that urgently need help and cannot be made to wait for a few months,” the official said. Exporters of garments and chemicals to Europe have a strong fight in store this year as the sectors have graduated out of the EU’s Generalised System of Preferences (GSP) scheme and would no longer be eligible for lower import duties.

Not only will these products have to face full import duties, ranging between 6 per cent and 12 per cent, exporters will have to face competition from countries such as Pakistan and Bangladesh that can export to the EU duty free under the GSP plus scheme.

“Although a number of other items including leather, auto and minerals will also be affected, it is garments and chemicals that are likely to be hit the most,” the official said. The Government is considering a 2-3 per cent incentive for the two items.

Pharmaceutical exports have been registering low growth over the past few months due to growing competition from China and stricter quality control procedures in the US and the EU.

“Reimbursement of registration charges for drugs can be a big help to exporters as in markets such as the US, the amount is substantial,” the official said.

In the first three quarters of 2013-14, exports posted a growth of 5.9 per cent to $230.33 billion compared to April-December 2012-13.

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