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India's engineering exports can well surpass the crucial $70-billion mark this year if exporters are made competitive by extending them 3 per cent interest subvention for the entire fiscal 2014-15, the apex body EEPC India has said.
Reiterating its stand ahead of the Union Budget, the organisation said, “Interest subvention of 3 per cent was given to the MSME (micro, small and medium enterprises) sector as were 235 engineering tariff lines till March 31, 2014. This should be extended for 2014-15, at least in view of the above gap in cost of finance between our rates and international rates, and should be extended to the entire engineering sector,” said EEPC India Chairman Anupam Shah, in a statement.
He said the current budgetary allocation on this account is Rs 1,200 crore and an additional amount of Rs 500 crore would cover the entire sector.
“This will have a multiplier impact on engineering exports and we could surpass the target of $70 billion by another 5-10 per cent if interest subvention of 3 to 4 per cent is given to the entire engineering sector,” he added.
With regard to rupee export credit, he said the interest rate charged varied from bank to bank and was at present between 10.5 and 11 per cent per annum. “With 3 per cent interest subvention, rupee export credit comes in the range of 7.5 per cent and 8 per cent per annum. Thus, interest subvention lowers the cost of credit considerably, even though there is considerable gap with one-year libor rates,” he said.
Stating that the order book position from the US has considerably improved, which is likely to get reflected in the shipments in the coming months, Shah added: “With exporters across manufacturing lines receiving orders, thanks to an impressive revival of the US in the second quarter of the year, they must get working capital at competitive rates so that their zeal for higher shipments can be maintained,” Shah said.
Engineering exports in fiscal 2013-14 aggregated $62 billion, with the US alone accounting for about 15 per cent of the shipments. The sector is dominated by small and medium enterprises, who find it even more difficult to compete in the absence of support from the Government.
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