Export sops to go as rupee falls

A host of sops given last year to Indian exporters to help tide over the sharp appreciation of the rupee will not be extended by the Centre beyond September 30, when the sops are set to expire.

This is on account of the rupee depreciating about 10 per cent against the US dollar since April this year. The rupee is expected to continue to weaken from its current level of nearly Rs 43.

The sops that will be rolled back include interest rate subvention on pre- and post-export credit as well as the 1-3 per cent increase in duty drawback and duty entitlement pass book scheme (DEPB) rates, which were announced in various phases last year. The enhanced duty drawback and DEPB rates will be rolled back to the values which they were in before the sops were announced.

However, service tax exemption to export-related services will continue. Duty drawback and DEPB are used by exporters to get credit on various duties paid by them while manufacturing the goods meant for exports.

"The sops are likely to be rolled back. The decision is likely to be formally announced later this month," said Commerce Secretary Gopal K Pillai on the sidelines of a function organised by the Delhi Exporters Association.

Exporters will, therefore, get a two-month cushion, allowing them to adjust their long-term export contracts accordingly.

Predictably, the export community is upset. Federation of Indian Exporters Organisations (FIEO) president GK Gupta said: "The depreciation in the rupee has not benefitted exporters as they had covered their exposures in the forward market. The rupee has depreciated more than it was expected. Removal of sops will hit us."

As nearly 70 per cent of India's export orders are dollar denominated, exporters suffered losses while converting their dollar earnings to rupees, when it was appreciating.

While the finance ministry will be responsible for the roll back of the hiked draw back rates and interest subvention in pre- and post-export credit, the commerce ministry will issue a order on ending the enhanced DEPB rates.

Meanwhile, Commerce Secretary Gopal K Pillai on Monday unveiled a single-account drawback disbursement system for exporters. The new system will do away with the practice of having bank accounts in each sea and inland port to avail drawback claims.