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EEPC raises doubts on finance ministry's role in promoting engineering exports

KOLKATA: New EEPC India chairmanAnupam Shah expressed doubt whether theministry of finance is committed to helpingengineering exports and reducing Current Account Deficit (CAD), as is seen by discriminatory treatment meted out to exporters of the key engineering sector. 

Addressing his maiden press conference after taking over the premier export promotion council, Shah said without a substantial increase in engineering exports, there is no way the country's 
CAD can be reduced. 

Wondering how long India will continue to depend on Foreign Institutional Investors, Shah said while the employment-oriented engineering sector used to be the largest contributor to the total exports basket accounting for 20% till recently, petroleum exports have replaced the engineering sector at the top. 

Giving unfair treatment to the engineering exports, the 
Finance Ministry has cut back the duty drawback rates for over 3500 products ranging between 25-40 per cent while these rates should have actually been increased by at least 30 per cent. 

The value addition norm used for computing the drawback rates has been raised from 33 per cent to more than 250 per cent in the most alarming way, he said. 

Thus, the advantage accruing to engineering exporters by 
rupee depreciation and benefits vis-a-vis Chinese Yuan has been taken away, the EEPC India chief said wondering why the sector was being singled out. This impression gets created since the garment exports rates have been substantially revised upwards. 

This was being done when the cumulative engineering exports figure for April-August remains negative (-) 4.19 per cent, even though export has turned positive by 2.27 per cent only in August. 

This duty drawback rate cut is uncalled for and the nearly 13000 members of the Council vehemently protest this UNFAIR treatment that is being meted out to the engineering sector. The Council is receiving complaints regularly from its members, be it from the large scale, medium scale or small-scale sector, about the sharp reduction in Duty Drawback rates. "There seem to be non-economic factors behind this irrational decision of the Revenue Department," he said. 

After nearly 18 per cent depreciation, Rupee has now started appreciating and the indications from the Finance Ministry suggest the Rupee will appreciate further. 

Besides, the Finance Ministry is creating other roadblocks. For instance, engineering exports from Non-EDI ports like Raxual, the Customs is not accepting e-BRC and asking exporters to get manual BRCs from banks. On the other hand, the DGFT in the 
Commerce Ministry has directed 11 more banks to stop issuing manual BRCs. In the process, the exporters are being made to run from pillar to post. Also non-EDI ports like Nepalgunj is not included for Drawback benefit. 

Moving to other issues, Shah also sought Rs 500 core Technology Upgradation Fund Scheme for the MSME Engineering Sector. With "greenshoots" of recovery in the developed world, it was time for Indian MSME engineering sector to 
invest in technology and move up the value chain. This was the most important lesson the recent downturn in global economyhad taught the engineering sector. 

"We must do two things, he said: first invest in technology to ensure that our medium and high value added exports as a percentage of our total exports reach 75% from the present level of 55% in the next five year; and second expand our capacities and scale to benefit from the FTAs that India has been signing so that we can be part of the global production networks." 

It is only then that we can bridge the nearly $17 billion trade deficit in the engineering sector and think of having a surplus in engineering trade by the end of the 12th Five year Plan. The Council will be forwarding a Draft TUFS Scheme for the consideration of the Government. 

Shah also pointed out that the EEPC India (formerly 
Engineering Export Promotion Council) is making all-out efforts to reverse the negative trend and ensure that the fiscal 2013-14 ends with a tidy positive number. In this regard, EEPC India will be organizing the India Engineering Sourcing Show (IESS) in Mumbai next year between January 22 and 24 where buyers from a host of African, Central Asian, European and Arabian besides Canada have confirmed participation. 

Despite the overall trend turning positive, 16 of 33 engineering panels recorded negative growth in August. These included Railway transport equipment, machine tools, shipping boats, IC engines and parts, air-conditioning and products of iron. 

Out of the top 25 countries in absolute value terms, nine countries recorded negative growth during April- August 2013. While 
USA remains our top engineering export destination, the slowdown continues with a negative growth of 12% during April-August 2013 as compared to the same period last year. Uncertainty in the renewal of GSP benefit and the AD/CVD on finished products like threaded-rods is adding to the dilemma of the exporters to the US . 

Shah also highlighted the problems of labour shortages in several parts of the country like Punjab and Maharashtra. This is mainly because of NREGA. Some sort of a scheme should be introduced wherein 100 days of employment is paid for under the NREGA scheme while the balance days for the rest of year are paid by the industry. 

The EEPC Chairman said now that panic situation around Rupee depreciation has eased considerably, the Reserve Bank and the Finance Ministry should not support the currency any further because in that case the advantage to exporters gained earlier would cease to exist.