Budget 2016: EEPC eyes rupee stabilization & SMEs

At the moment, the rupee is over-valued working to the disadvantage of exporters,  says EEPC

By Sai Nikesh

After having witnessed the longest-ever export slowdown in 2015, the Engineering Export Promotion Council (EEPC) has come up with few recommendations to the Union government for implementation in the upcoming Union Budget 2016-17, which it feels would give enough boost to the domestic industry.

In a mail response, T S Bhasin, Chairman, EEPC, shared the Council’s key expectations from the government in the upcoming Budget.

“For exporters who are battling one of the worst ever crisis, the Budget can be a soothing balm if the Finance Minister (FM) Arun Jaitley announces significant level of interest subvention, coupled with conditions which allow the rupee to find its true value,” says Bhasin.

He raised concerns that the rupee is over-valued working to the disadvantage of exporters, at the moment. A

s always, the Council pitched the need to encourage small-scale industries, which account for majority of engineering products manufacturing.

Bhasin further said, “the engineering exporters many of whom belong to the Small & Micro Enterprises (SMEs), want the FM to extend the similar ease of dispensation as was unveiled under the Start-up India initiative.”

“Things like three-year moratorium from inspection and self-certification should be extended to the SMEs along with exemption of capital gains tax, if personal assets are sold for induction into businesses,” he noted.

He pitched for a simpler, transparent and faster drawback regime for credits into the accounts of the exporters. It should be dynamic enough to keep pace with the domestic duties and increasing cost of production, he added.

It is noteworthy as pointed out by EEPC, ‘excessive protection to the domestic sectors like steel’ has hit the country’s engineering exports in a major way.

“The situation has worsened by excessive protection to the domestic large scale steel firms by way of safeguard duty, anti-dumping duty. There is also a proposal to fix a Minimum Import Price (MIP).

 

All these measures are lopsided and overlook the interests of the small and medium enterprises which are then made to buy their raw material at higher costs losing competitive edge in the tough international market,” the EEPC India said in its year-end review.

In this regard, the Council raised its voice against the government’s decision to raise MIP on steel products saying it could act as a deterrent to the already-suffering engineering export segment and urged it to provide a compensatory mechanism for higher steel prices and implement a new International Price Reimbursement Scheme (IPRS) at the earliest.

Setting aside promotional schemes like MEIS, a new scheme to lower transaction costs (where the benefits accrue for all tariff lines and for all countries), Technology Upgradation Fund for MSMEs, National Shipping Regulator to ensure a transparent mechanism for levying of various shipping charges, continuation of tax exemptions, are among key demands in EEPC list.

India’s overall merchandise exports witnessed a 12-month continuous fall with November being one of the worst performed months with a steep 29% drop, closing the year with the country battling for exports.

This article was published in The Dollar Business on February 22, 2016

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