The Hindu Business Line : `Logistics, India's weakest link in exports'

Exporters face innumerable infrastructure bottlenecks. Inland movement of goods remains a major obstacle, as exporters are helpless in the face of high cost of transport and inter-State and intra-State barriers.

INDIA'S exports have never before had a better run than they do today with merchandise trade zooming to $63.5 billion in 2003-04 from $43.8 billion in 2001-02 and $52.7 billion in 2002-03. Even as the Medium-Term Export Policy (2002-07) had forecast an average annual growth rate of 12 per cent in dollar terms, exports have grown at 20 per cent-plus the last two years with the current year set to do a repeat considering the buoyant trends so far.

Though competing in an increasingly integrating global economy, domestic industry and trade have not lost their nerve, as widely feared.

Both small and medium enterprises (SMEs) and big export and trading houses have shown their staying powers to capture a share of the global market.

The United Progressive Alliance (UPA) Government lost little time after taking over to unveil a New Foreign Trade Policy (FTP) that hopes to double the country's share of global trade from 0.7 per cent now to 1.5 per cent in the not-too-distant future.

It is against this backdrop that the apex organisation of exporters, the Federation of Indian Export Organisation (FIEO), saw some churning within. Till two years ago, the four-decade-old FIEO was in the eye of a storm with several allegations levelled against its senior functionaries.

At such a time Mr M. Rafeeque Ahmed, a Chennai-based leather products exporter, was elected President of the FIEO, in November 2002 for a two-year term.

Now, at the end of his tenure, Mr Ahmed shared with Business Line his views on exports, how the trade policy can be tailored to leverage the country's inherent strengths in some important segments of manufacturing and services,.

He also explained how a synergetic approach by the Commerce and Finance Ministries can address some of the fundamental problems of exporters and lead to a significant jump in exports.

Mr Ahmed is convinced that exports not only hold the key to solving the problems of underdevelopment and unemployment but also improving the quality of life people in a country the size of a continent.

Excerpts from an interview with Mr Rafeeque Ahmed:

On his stewardship of the FIEO:

In the last 40 years of the FIEO, I was the first President duly elected from the South for a term of two years; past FIEO chiefs have always been from Mumbai or Delhi.

As the Organisation was in a difficult situation with many of its senior functionaries facing grave charges, my first year in office was a difficult one, as even the Commerce Ministry officials were not willing to give us audience. As all activities of the FIEO were focussed on big cities, leaving the hinterland in a limbo, I took it upon myself to convene FIEO meetings in small cities and towns to effect an interface between the officials of the regional DGFT (Directorate-general of Foreign Trade)/ Customs and the local exporters so that their problems could be heard and solved.

Thus, in Bhubaneswar (Orissa) a meeting was arranged to hear exporters of iron ore and seafood for the first time and this trend continued with other cities and regions too.

In the past, regional chairpersons were nominated which led to lobbying and string-pulling but I set up a committee to re-examine the FIEO constitution so that a genuine exporter is elected regional chairman.

The FIEO's focus also shifted to `marketing' places where exporters ordinarily do not venture. Commonwealth of Independent (CIS) countries hold immense potential and the FIEO led a delegation to this place, which resulted in tremendous response to a variety of products.

With the FIEO a registering authority for services sector too, the Organisation led a delegation of representatives of top hospitals to Singapore, Malaysia and Indonesia to promote India's expertise in health-care.

Next Gulf countries are to be targeted, followed by Pakistan and Afghanistan, once relations get on a firm footing.

The FIEO was functioning at a rented space and I got around the Ministry of Commerce to get land for its own building; the new office building is coming up at a choice location on way to the Delhi airport.

The FIEO will move there in a couple of months. We will rent out the surplus space to similar organisations and financial institutions such as banks.

Because of several initiatives, the FIEO membership has risen from 5,823 in 2000-01 to 8,282 in 2003-04. The net surplus notched up by the organisation moved from Rs 87.19 lakh to Rs 1.85 crore in this period.

On the problems of exporters:

The appreciation of the rupee against the dollar erodes the competitiveness of our exports, particularly when the value of competitor China's currency value remains unchanged.

The handling capacity of ports is 450 million tonnes now, and in another five years it would hopefully reach 620 million tonnes.

But to effect exports of $175 billion, the handling capacity must be 950 million tonnes. Logistics is the key to China's tremendous export success, but remains India's weakest link.

On export promotion measures like DEPB being taxed:

The Duty Entitlement Passbook (DEPB) scheme is a credit for duty neutralisation on inputs used for export production. DEPB credit utilisation in several cases over the past seven years is being re-examined for possible tax evasion by exporters.

As one tax tribunal has favoured this approach and another the exporters, a Special Bench was set up to resolve the issue and its judgement is awaited.

We would like the issue to be settled once for all as it upsets the cost calculation of the exporters and leads to harassment.

On FTAs:

Exporters have no problems with the spate of free trade agreements (FTAs) India is signing with various countries because the more we open our doors the more others will do so, allowing better market access for our products.

The issue of global versus local affecting domestic manufacturers catering to the vast domestic market should not be used as a pretext to go slow on the FTAs.

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