Time to smile
New Delhi, Dec. 26: The government is likely to announce another round of sops to exporters before the budget, which could include reimbursement of state-level taxes.
Officials said the reliefs could be announced after receiving the recommendations of a committee appointed by the Prime Minister, which is working on a long-term strategy for exporters who have been hit hard by the rising rupee.
The officials said the Centre could soon call a meeting of state finance ministers to discuss the reliefs.
Two options are being explored on reimbursing state taxes. One option is states refunding taxes; the other is the Centre reimbursing exporters and adjusting the sum against other allocations to states.
The Centre wants state governments to share the burden of reliefs to exporters. It has already announced three packages in the last six months.
With many losing jobs because of the rupees rise, exporters expect the reliefs to take care of their immediate problems as well as tide themselves over the crisis in the long run.
The Federation of Indian Export Organisations (Fieo) has asked for an extension of the Duty Entitlement Passbook Scheme, valid till March 2008, up to 2010.
Fieo president Ganesh Kumar Gupta said exporters also needed tax exemptions on services such as commissions to foreign agents, fees to professionals and overseas travel.
For the exporters, the bad news continued today as the rupee maintained its upswing against the dollar. The rupee climbed to Rs 39.42 per dollar from 39.44 on Monday.
Even the projections for 2008 are gloomy. Goldman Sachs said it expected the rupee to appreciate to Rs 38 over the next 12 months, buoyed by increasing inflows of foreign capital and strong economic fundamentals.
Data compiled by the Confederation of Indian Industry shows the rupee to have risen 11.8 per cent against the dollar between December 2006 and November 2007, the most vis-à-vis a basket of currencies.
The Chinese yuan appreciated 5.13 per cent against the dollar and South Koreas won, 0.74 per cent.
A competitive advantage was acquired by Sri Lanka whose currency depreciated 2.4 per cent against the dollar, Indonesia (1.95 per cent), Pakistan (0.07 per cent) and Hong Kong (0.06 per cent)
The government has so far given over Rs 5,000 crore of relief to exporters, including refunds of service taxes on few items, a two per cent interest subvention, upward revisions of duty drawback and duty entitlement passbook scheme rates and import duty cuts on a number of man-made fibres and their intermediates.
Hit by the appreciation of the rupee, exporters have retrenched 30,000 regular employees and 100,000 contract labourers. Earlier, Fieo had suggested a corpus to refinance banks for covering their hedging charges.
Besides, the dollar rates that are relevant for some schemes should also be fixed.
The government should also ask banks to reduce the general interest rate by 100-125 basis points. This will lead to a fall in export credit rates.