Statement by FM in parliament on further support to export sectors on account of rupee appreciation
	16:25 IST

Following is the text of the statement made by Finance Minister, Shri P. Chidambaram in Parliament today on further support to export sectors on account of Rupee appreciation:-             “The rupee appreciated 9.7% against the US$ between April 3, 2007 and November 20, 2007.  On a year on year basis, between October 2006 and October 2007, the appreciation of the rupee against US$ has been 15.1%.             The rupee appreciation has been less relative to other hard currencies as indicated in the table below. Rupee Appreciation/Depreciation vis-à-vis Major Currencies       Between April 3, 2007 – November 20, 2007 Between Oct 2006 and Oct 2007 1. US dollar 9.7 15.1 2. U.K. Pound 5.6 5.6 3. Japanese Yen 2.5 12.4 4. Euro -0.0(neg) 2.1     *   Based on average buying and selling rates reported by FEDAI               In many ways, the appreciation of the rupee reflects the strength of our economy going forward.  The rupee appreciation has a positive side to it in terms of lower production costs in sectors involving imported raw material and intermediates, lower oil import bill and lower cost of external debt servicing.  Nevertheless, the sharp appreciation of the rupee over the last several months has put pressure on the export sectors, particularly those with low import intensity such as leather, textiles, handicrafts and marine products.  Government is sensitive to the pressures on these sectors, and is conscious of the need to offer support to export sectors to prevent job losses and to give time to these sectors to make a smooth adjustment to the changing economic scenario.  Towards this end, Government had offered two packages of support to exporters earlier this year.  The details are as follows. July 2007 Package             The  July 2007 package included the following measures: Accelerated reimbursement of TED and CST dues to exporters. Government decided to provide subvention in the rate of interest on these credits by 2% on the outstanding balances for the period 1.4.2007 to 31.12.2007.  This dispensation was made available to following sectors : A. Textiles (including handlooms) Readymade Garments Leather Products Handicrafts Engineering Products Processed Agricultural Products Marine Products Sports Goods Toys All exporters from the SME sector. Upward revision of duty drawback/DEPB rates. Service Tax (refund/exemption) for exports in respect of four services: (a) port services; (b) transport of goods; (c) transport by railways; and (iv) other port services.             The total financial relief on account of the above measures was estimated at around Rs. 1400 crores.   October 2007 Package             The Government offered a second package of support in October 2007 which included the following measures: Service Tax (refund/exemption) for exports in respect of three more services: (a) general insurance; (b) technical testing and analysis; and (c) technical inspection and certification. Provision to pay interest on EEFC accounts of exporters on outstanding balances subject a maximum of US$ 1 million valid up to 31.10.2008. The period for interest subvention on pre-shipment and post-shipment credit extended from 31.12.2007 to 31.3. 2008.  Four more sectors: (a) jute and carpets, (b) cashew, coffee and tea, (c) solvent extraction and deoiled cake, and (d) plastics and linolen, added to the list of export sectors eligible for interest subvention under pre-shipment and post-shipment credit. The coverage under Vishesh Krishi and Gram Udyog Yojana (VKGUY), a scheme aimed at promoting export of agriculture and village industry products, was expanded to include additional products and the budget allocation was doubled from Rs.300 crores to Rs.600 crores. November 2007 Package             Leather, handicrafts, marine products and textile sectors are particularly hard hit by the appreciation of the rupee in view of its low import intensity and large value added features.  The export industry and industry associations met the Prime Minister.  I also had extensive meetings with them together with Banks.  Based on these meetings, we are now offering the following further support to exporters: Additional subvention of 2% (in addition to the 2% already offered earlier) in pre-shipment and post-shipment credit to the following sectors: Leather and Leather manufacturers Marine products All categories of textiles under the existing scheme including RMG and carpets but excluding man-made fibre Handicrafts  The total subvention will be subject to the condition that the interest rate, after subvention, will not fall below 7%, which is the rate applicable to the agriculture sector under priority lending. Period of validity: 01/11/2007 to 31/3/2008   Term of credit: 180 days for pre-shipment and 90 days for post-shipment, excepting the carpet sector for which the term would be 270 days for pre-shipment and 90 days (like other sectors) for post-shipment.Service tax will be exempted for exporters under three new services: Storage and Warehousing services Specialised cleaning services (Fumigation and disinfection) Business exhibition services The allocation for reimbursement of TED and CST has been raised from Rs.300 crore and Rs.600 crore in the second supplementary.  (iv)        Presently, 6% interest is paid for delay in reimbursement of drawback claims beyond 30 days.  For payment within 30 days, no interest will be payable.  The interest is payable for delay from the date of approval to the date of payment if delayed beyond 30 days. Government have decided to extend a similar provision of payment of interest for delays in payment of terminal excise duty (TES) and Central Sales Tax (CST). The process for payment of interest will be finalized shortly. (v)         Customs duty on PSF and PFY is being reduced from current 7.5% to 5%, and on other man-made fibres from 10% to 5%. Customs duty on intermediates for PSF and PFY viz. polyester chips, DMT, PTA & MEG would also be reduced from 7.5% to 5% and on paraxylene (a raw material for PTA) from 2% to nil. No change in Customs duty for nylon chips, nylon yarn, caprolactum, rayon grade wood pulp and acrylonitrile.  Notification will be issued shortly. Respective Councils in the textile sector have requested revision of drawback rates. They have been asked to submit relevant data to the Drawback Committee which would study the proposal and make its recommendations to the Government. A decision in the matter would be taken based on the Drawback Committee’s recommendations.” BSC/RP/GN-497/07