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Budget 2012 may be a dry affair for exporters

Given the tight fiscal room within which the government is operating, for the first time in many years, the Budget may not have any incentive for exporters.

“It is unlikely the Budget will have anything to offer to the export community this financial year,” a senior commerce department official told Business Standard, adding it had presented an extensive wish list to lift the country’s merchandise exports, which had been having a poor run since the second half of the financial year.

Officials have stated the finance ministry is also contemplating doing away with some of the key export promotion schemes, to check revenue leakage —such as the advance licence scheme and export promotion capital goods scheme (EPCG).

Last year, the revenue forgone on account of these two schemes stood at Rs 25,795 crore against Rs 17,109 crore in 2009-10. The government had foregone Rs 58,590 crore in 2010-11 in revenues due to export promotion concessions against Rs 43,375 crore a year ago.

Ramu S Deora, former president of the Federation of Indian Export Organisations and chairman of Mumbai-based G Amphray Laboratories, said: “The rupee has already breached the 50-level mark, cost of inputs has touched the roof, things are not looking good at all. We have little hope that the Budget will offer anything significant. “Today, the biggest problem is revenue constraints and a massive subsidy burden that the government is facing. I believe the government should remove the advance licence scheme and EPCG scheme as they benefit only the big trading houses.”

Indian exports have been seeing severe downturn since August last year on account of the euro zone crisis and demand slowdown in the US: The regions account for around 30 per cent of India’s goods export basket.

“All eyes are now on the Foreign Trade Policy,” said a Bangalore-based exporter who did not wish to be identified.

Last month, FIEO had urged the Finance Ministry to consider extending interest subvention of more than three per cent to all sectors till March 2013. Interest subvention is now given to exporters in handicrafts, handlooms and carpet sectors. It has also demanded exemption of service tax on currency conversion for export.

In the previous Budget, the government had given Rs 2,100 crore as sops to reduce transaction cost of exporters. It has proposed a scheme for refund of taxes paid on services used for goods export. A mega cluster scheme for leather products was also introduced. The government had taken steps to upgrade Customs administration.

In the Budget of 2010-2011, the finance minister had offered interest subvention of two per cent for exports of handicrafts, carpets, handlooms and small and medium enterprises.

The government had also reviewed the annual supplement to the foreign trade policy of 2009-2014 last year in October in which it offered concessions worth Rs 900 crore. The measures included tax credit for shipments on select items such as engineering, pharmaceutical and chemical goods just days after the Reserve Bank of India announced concessional interest rates for exporters.

Last year the government had also ended the most favourite schemes of exporters, Duty Entitlement Passbook Scheme (DEPB), a duty reimbursement of basic and special Customs duty paid by an exporter on an imported input used in the export product.

The government had a revenue loss of Rs 8,520 crore on account of the DEPB scheme last fiscal.