Anand Sharma Seeks Interest Relief For Exporters.

The commerce department will soon ask the finance ministry to re-introduce interest rate subvention or discount scheme for certain category of exporters to make cheaper funds available.

The country's biggest lender, State Bank of India , has raised its base rate by 1.75 percentage points since July 2010. Banks have to lend at least at base rate.

"Cost of funds should come down for exporters to encourage them to make investments, produce more and stay competitive," a commerce department official told ET.

The commerce ministry has set a $500-billion exports target for 2013-14, against $246 billion in the current year. Commerce minister Anand Sharma will take up the matter with the finance minister Pranab Mukherjee later this month. The government gave a 2% discount to eight exports sectors two years ago to help them compete better after demand collapsed in developed world because of financial crisis.

The scheme lasped at the end of the last fiscal when exports grew at its highest pace at 37.6%.

Industry says the rapid pace may not be possible to sustain because of rising cost of credit.

"Cost of funds for exporters has increased by more than half over the past one year affecting competitiveness," pointed out Ramu Deora from exporters body Fieo.

Interest rate export credit has gone up to 10.75% from 9% in April 2010, claims Fieo.

"If you take into account the 2% subvention given by the government till March 31, the net increase in cost of funds over a period of thirteen months for exporters is 53.6%," Deora said.

"Exporters in China and other significant developing countries have access to credit at much lower rates than in India," points out K T Chacko, director, Indian Institute of Foreign Trade.

Interest subvention was available to handicrafts, carpets, handlooms, small and medium enterprise, leather, jute manufacturing, engineering goods and textiles.

Under the scheme, banks pass on the subvention to exporters and later claim it from the Centre.

The finance minsitry has not been in the favour of extending exports sops in view of the strong growth.

Source : economictimes.indiatimes.com