CII wants PM to help exporters

The Confederation of Indian Industries has sought prime minister's intervention to resolve the issue of losses suffered by exporters, who were sold exotic and complex derivative products by banks.

The chamber has suggested setting up of a committee under the chairmanship of Prime Minister Manmohan Singh to ensure resolution of the issue between the banks and exporters.

Many exporters, who hedged their currency risk by executing forex derivatives contracts with banks, suffered huge losses on fluctuation in the value of rupee and now want that the banks compensate them.

Several of them entered the contracts with banks without understanding the working of the complex financial products and landed in losses.

"Many Indian exporters have lost substantially in derivative products offered by financial institutions. The loss by small and medium enterprises itself is over 2,000 crore (Rs 20 billion)," CII National Committee on Trade chairman Sanjay Budhia said.

Many exporters entered into derivative deals with banks in early 2008 after the rupee strengthened to 39 on apprehensions that it would strengthen further.

These contracts allowed them to sell dollars between 39 and 40.

With the rupee weakening to 50 against the dollar later, many exporters booked huge losses. But these days most forex advisors are advising their clients to wait for the rupee to fall further before getting into forex deals.

The commerce ministry has called a meeting of different commodity specific export promotion councils and Federation of Indian Export Organisations to see the impact of the stimulus packages announced earlier by the government in December and January.

CII suggestions also include increase in tax refund rates by about five per cent, removal of seven per cent interest rate ceiling on export credit and two per cent interest subsidy.

Asked about exports target of $200 billion for the fiscal, Budhia said, "It looks very difficult to achieve."