New Delhi, Feb. 5 A Committee, chaired by the Minister of State for Commerce, Mr Jyotiraditya Scindia, to suggest ways to reduce transaction costs of exporters, will submit its report by March.
Transaction costs include time and money spent by exporters in adhering to the Government's export policies and procedures. These costs in India range from 5-10 per cent of the Free On Board value of exports (cost of goods including the loading charges). It translates to over $10 billion annually.
Sources involved in the report's finalisation told Business Line that it would benchmark India's transaction costs with the global best standards and specify three targets – (i) the easily achievable - to reduce the transaction cost by 2 per cent from the current levels, (ii) achievable with some effort - to cut the next 5 per cent from the transaction costs, (iii) the ideal, but impossible - to totally eliminate them.
The Committee would also recommend replacing the requirement of filing separate invoices – for customs, excise and value added taxes – with a single invoice. Global consulting firm McKinsey is also involved to lend credibility to the study.
Huge transaction costs increase the cost of Indian products, resulting in exporters losing out to foreign competitors who offer cheaper goods in markets abroad. Bringing down transaction costs to around 3 per cent would help India to reach global standards, the sources said.
Six sectors identified
The Committee has identified six sectors – agriculture, engineering, leather, readymade garments, textiles and chemicals & pharmaceuticals.
It is doing a transaction costs comparison – from the receipt of the order till the exporters get their incentives from the Government – with the global benchmarks.
It is also looking into the delays faced by exporters in getting clearances and the corruption involved therein.
Besides, it is collecting details on the multiple documentation and compliances that the exporters are subjected to.
The Committee is also studying the reasons for delays in refunds, including that of VAT and excise duties, as well as the requirements of bank guarantees and bonds that add to the cost.
Once the report is submitted, the Commerce Ministry will take it up with other Ministries and State Governments for its implementation.
Source : Business Line