Indian Exports to be badly hit as DEPB scheme is removed

CEO of shows his concern in a letter to his B2B members.

DEPB withdrawal will impact exporters

Even as the issue of ending the Duty Entitlement Pass Book (DEPB) scheme after June 30 gathers heat, the Finance Ministry seems adamant about its move to do away with it. And who will be hit hard? Once again, small exporters will be affected more due to the expiry of the scheme, under which exporters get sops to the extent of 8-9 percent of the value of shipments.
What irks me is the fact that this sudden move will affect the profit margins of exporters tremendously, owing to the fact that they have already done the costing of various international contracts based on the DEPB scheme. This leaves no room for exporters to negotiate with buyers for better costing.
I feel a long-term approach was required before deciding on the withdrawal of the scheme. The scheme could have been continued till the time the Goods and Service Tax (GST) was introduced. In addition, with the withdrawal of the scheme, it seems to be a herculean task to achieve the export target of USD 500 billion by 2014.
The time too for the withdrawal of the DEPB scheme beats all rationale. Exports from the country have just started recovering after years of global economic slowdown and with no DEPB scheme, the sector can land up in a precarious position yet again. On one hand the global economic conditions are still very fragile, while on the other, the interest rate has gone up from 7 percent to 10.25 percent, a 46.43 percent rise in less than a year. So where does the exporter stand? Input costs are rising, bank finance is hard to come by and the government has decided to withdraw the schemes that could have helped them!
I strongly believe that the government needs to take into account these factors before deciding on the issues related to interest subvention of 2 percent and continuation of the DEPB scheme. With the Commerce Minister, Mr Anand Sharma likely to meet the Finance Minister upon his return from the India-Africa Forum Summit, to convince him to continue the DEPB Scheme, let’s just hope that good sense prevails.

Hitesh Anand

I am a post graduate from Newcastle University, UK. I like studying and analyzing economic data and financial health of world.

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