KOLKATA: Troubled by rupee appreciation at the time of the slump in engineering exports from India, exporters have urged the government to restore the interest rate on term deposits in foreign currencies, which is being parked by exporters in the Exchange Earners’ Foreign Currency (EEFC) account.
Last time, when the rupee value appreciated above Rs 45 against the dollar about a year back, the Reserve Bank of India had permitted an interest rate of 0.5% above the Libor rate on EEFC account to exporters in the small and medium enterprises (SME) sector. The interest rate, which was extended to outstanding balances of $1 million per exporter, was withdrawn in October 2008 when the rupee value started depreciating since the middle of last year.
Now, with the rupee value again hovering around Rs 47, engineering exporters have resumed their demand for restoring the interest rate on EEFC accounts, so that they can earn some additional income at a time when they are experiencing the toughest time ever.
Hit by a slump in orders for engineering goods from its traditional export bastions, particularly developed countries, engineering exports from the country declined 24% to $17.5 billion in the first six months of 2009-10 from $23.16 billion in the same period last year. This is the sharpest decline in engineering goods exports ever from the country. Even at the worst time of recession, engineering exports from the country grew 18% to $40 billion in 2008-09.
Faced with such an unprecedented fall in engineering exports, EEPC India has asked for several sops from the government to meet challenges of global recession. One of which is restoration of interest rate on EEFC account, said EEPC India chairman Aman Chadha.
To strengthen the engineering sector, the export promotion council has also urged the government to launch a Rs 500-crore fund for technology upgradation for the sector, rise in Duty Entitilement Passbook (DEPB) scheme and drawback rate by another 5% and extension of RBI’s 2% interest subvention scheme to the sector to enable large units get the interest relief. Currently, drawback rates on engineering goods vary between 1-5%, while the DEPB rates range between 3-6%.
Source : The Economic Times