FIEO president writes to PM urging government to support exports sector
Says helping hand may assist them to revive and bounce back once global situation improves
Ludhiana: FIEO President, Mr Sharad Kumar Saraf has written to Prime Minister Narendra Modi urging the government to support the exports sector. The letter reads as under:
“Corona virus has given a serious jolt to global economy and more so to the global trade. It is already evident that COVID-19 has triggered a deeper recession than that of the 2008-2009 Global Financial Crisis. Much of the developed world is now amid the greatest economic disruption since the Second World War. The Monetary authorities in various countries have undertaken unprecedented actions to support their exports in global markets.US, UK, Canada, Japan, Germany and even Bangladesh has provided bail out/financial package to their industry to sail through difficult times.
Our exports will take unprecedented hit in such challenging times. The exports sector is facing over 50% cancellation. The worst hit are the life style product like leather, carpets, handicrafts, apparels etc which are having over 75% cancellations. This will also put pressure on current account deficit as overseas remittance will decline so will be FDI/FIIs inflow in the country.
Speed is of the essence in mitigating any crisis. Therefore, we request immediate help through rapid policy decisions to mitigate the crisis and prevent further structural damage to both industry and economy.
1. Covid Interest free Working Capital Term Loan (Rs 1974 Cr) Government to allot Rs 30,000 Cr to exporting companies for easing their working capital liquidity issues.
➢ The loan amount should cover 6 months gross Salary and Wages, Rent and Electricity charges.
➢ No additional collateral or paperwork to all industrial units who have a clean record with the bank before lockdown.
➢ The repayment should be in 18 equal installments after 6 months initial moratorium.
➢ May be an extension of the NIRVIK scheme to Guarantee the banks.
Cost to Government:
Credit Cost 30,000 Cr @ Repo [email protected] 4.4% = Rs 1704 Cr (660 Cr + 1044
Cr) (6 months moratorium + 18 months reducing balance)
Credit Guarantee Cost of NIRVIK @0.72% = 270 Cr (108 Cr + 162 Cr) (6 months moratorium + 18 months reducing balance)
Total Cost to GOI = Rs 1974 Cr
Sir, there is a high risk of large scale unemployment after Lockdown (especially in the labour intensive sectors), if they are not accorded fiscal relief to ease their cash flow.
2. EPF and ESIC waiver for 3 months (Rs 16200+ Rs 2700 = Rs.18900 Cr) Labour Intensive sectors are in extreme pressure to pay wages, but do not have liquidity or cash flow to even pay the EPF and ESIC. These sectors carry a huge cost of employment while facing over 75% order cancellations and may close.
• Maximum Salary Eligibility to be limited to Rs 15,000.
• Should be for 3 month period
• Companies with minimum 50% export turnover maybe eligible
Assuming 15 million workers @15,000 Rupees PF @24% for 3 months the cost would be 16200 Cr
15 million workers @15,000 Rupees ESIC @4% for 3 months the cost would be 2700 Cr
Total Cost to GOI: Rs 18,900 Cr
3. Additional MEIS on Exports in 2020-21:
Countries are providing huge financial support to their exporters. China has already provided 3% additional Export Tax Rebate on exports in March , 2020 . Indian exporters should be given additional 2% MEIS and labour intensive sector to be provided additional 4% MEIS on exports upto 31st March 2021. The MEIS should be given without realization as realization will be delayed in such tight liquidity globally. This scrip should be used for payment of any statutory levy including GST, Income Tax etc
4. Extension of Interest Equalisation Scheme for all exports:
Interest Equalisation Scheme, which lapse on 31st March, 2020, may be reintroduced immediately for all products upto 31st March 2021.
5. Implementation of RBI’s instructions:
All Banks (including private/foreign banks) must implement RBI relief measures announced on 27th March in full and they should not treat is as mere advisory. RBI may also clarify that pre/post shipment credit for exports are in the nature of working capital and thus eligible for concession granted on working capital.
6. Reduction in GST rates particularly on Hotels, Aviation and Travel
GST rates for these sectors, which are going through the worst phase, to be reduced by 50% for the next 12 months to help these sectors.
7. One Time Amnesty in Advance Authorisation/EPCG/EOU and other default in Customs duties:
Amnesty for default in export obligations under Advance, EPCG Authorisation, EOUs by waiving interest and penalty and charging only basic customs duty. The same may be extended to any other dispute in Customs matter.
8. One time amnesty for filing MEIS applications (without any time limit) and transmission of shipping bill with No declaration for MEIS:
DGFT must give one time amnesty to all who could not apply or get MEIS due to system failure or minor lapse in shipping bills. Similarly, all Shipping bill with “No” declaration for MEIS may be allowed to be transmitted by Customs to DGFT for claiming of MEIS to ease liquidity at exporters’ end. It is an established law that major benefit cannot be denied due to minor lapse.
9. RBI may extend the tenure of pre-post shipment credit:
All existing pre and post shipment finance in Foreign Currency or Indian Rupee should be extended on maturity by additional 90-180 days on auto route irrespective of the tenure of contract and sanctioned limit. Moreover, no deposit of money be insisted by banks where limit granted in foreign currency is crossed due to Rupee depreciation.
10. Subsidy on air shipments and lowering of CONCOR charges:
Provide 50% freight subsidy on air freight to encourage exporters to use air freight to compensate for time loss. CONCOR may also be asked to reduce charges in view of challenging times faced by exporters.
11. Time bound Exports Refund in 15 days:
All exports related refund and statutory refunds like Duty Drawback, GST etc should be paid to exporters, including risky exporters , within
15 days so as to ease liquidity at their end. A Bond may be taken from risky exporters so as to recover it, if so warranted.
Sir, we humbly request you to kindly announce a comprehensive package for exports covering the above issues so as to help exporters, many of whom are on the brink of closure.
A helping hand may assist them to revive and bounce back once global situation improve, which is only a matter of time. However, the moot point is as to whether they will survive to see the revival?”