FIEO seeks fresh package; moots exchange neutralisation fund

New Delhi, Jan 21 (UNI) Hard-hit by the continuing appreciation of rupee, FIEO President Ganesh Kumar Gupta today sought a fresh package from the government to compensate the exporters for their fast eroding profitability, saying that the situation was forcing them not to enter into fresh contracts.

''This seems to be a dangerous trend as our progressive competitors are sitting on the fence to occupy the space vacated by our exporters.

Therefore, something needs to be done urgently to restore competitiveness of our exporters,'' Mr Gupta said in an interactive session with The Forum of Financial Writers here.

The broad countours for a special package should include re-imbursement of state taxes, exemption from service tax on all services used while exporting, further extension of conventional scheme for exports credit and setting up of exchange utilisation fund.

Mr Gupta was supported in his interaction by FIEO Director General Ajay Sahai.

He said the main problem confronting the medium and small exporters was stability of the currency in the wake of high volatility of the rupee.

Exporters are not inclined to enter into long term contract or negotiate new ones.

Mr Gupta said while little fluctuation in currency was inevitable in a market determined exchange rate, sudden and sharp fluctuation in currency was not desirable for any segment of the industry.

With view to providing exporters the comfort level, the government needs to consider fixing the value of dollar for the purpose of exports only.

The exporters will be credited with the exchange rate determined in this regard and the gains due to rupee depreciation will be pooled in an exchange utilisation fund.

Mr Gupta, however, said the long-term solution to the problem of secular appreciation of the rupee lay in brand orientation, namely moving in this regard on commodities to brand.

While commodities have their prices set for them, market conditions of demand and supply brand can actually command premium for the improvement of intangible consumer need and preferences.

This will serve the purpose of price sensitivity and create price buffer to cushion the export sector against adverse market conditions such as appreciation of the rupee.

This would involve strategic policy initiative to move to high margin brand market overseas from the existing low margin supplier.

''I would urge all decision makers and policy makers to ensure that in our quest to achieve the larger objectives of globalisation, care must be taken not to marginalise those who are the countries wealth creators and have been at the forefront to get the country rid of the foreign exchange crunch,'' Mr Gupta said.

UNI MP/SBA PDT RK1852