The Hindu Business Line : FIEO to take up rupee upswing with RBI soon

A HIGH-LEVEL Federation of Indian Export Organisations (FIEO) team, headed by its President, Mr Rafeeque Ahmed, is meeting the Governor of the Reserve Bank of India, Dr Y.V. Reddy, in Mumbai later this week to seek urgent corrective steps to strengthen exporters' hands in an environment of appreciating rupee and shrinking profit margins.

RBI is also set to discuss the proposed `Gold Card Scheme' with FIEO top brass on industry's credit requirements, and how the scheme can best serve this purpose. The scheme was announced in January this year, and has till now remained only on paper.

No details of the scheme, meant for smooth availability of credit to the exporting community, have been notified yet, and exporters do not know when they will be able to avail themselves of the facility. Talking to Business Line from his office in Chennai, Mr M. Rafeeque Ahmed, President of FIEO, said exporters, now in a situation of heavily declining margins owing to the strong rupee, were now facing the threat of losing markets unless cheaper credit from banks is made available.

He said the meeting with the RBI was essentially to appraise the apex bank of the seriousness of the situation, and seek broad directions to banks to accommodate exporters in these difficult times, especially over packing credit in dollars.

Seeking export credit on Libor plus 0.75, he said that banks should be directed to meet the exporters' requirements of foreign currency on a priority basis.

Mr Ahmed said he was hopeful of some action only after the new Government takes charge at the Centre. ``But, we still want to keep the RBI informed for necessary action at the time of the next monetary policy correction.'' FIEO has suggested that RBI should lend dollars to Indian banks at Libor to enable them to offer export credit on Libor plus 0.75 basis.

The FIEO President said non-availability of dollars to exporters was largely owing to such loans being extended to banks to corporates (whether exporters or not) from FCNR funds.

Corporates pitch for these loans as these carry very low interest rates, he pointed out. Banks prefer corporates as they appear to be a safer option, it is pointed out.

The rupee climb, according to Mr Ahmed, has brought down profit margins of exporters to less than 5 per cent, and was threatening to both neutralise the export incentives now being offered and also eliminate the Indian exporters' competitive edge in global markets.

He expected a higher surge in exports if the rupee-dollar parity had been maintained at the earlier levels.

On FIEO's new mission to create greater export awareness among States, Mr Ahmed said the federation was now actively involved with many State Governments, particularly in the southern region.

FIEO has prepared the draft export policies for Andhra Pradesh, Karnataka (which already has a State policy on exports), Kerala, Tamil Nadu and Pondicherry.

In a bid to help exporters keep track of the changes recently announced in Exim Policy, as also the norms pertaining to drawback, customs procedures, excise duty rates, RBI regulations and the Market Development Assistance (MDA) scheme, FIEO has recently brought out a special booklet containing all the important changes made up to February 29.

Mr Ahmed said the booklet also contained important CIT decisions with regard to negative profits under Section 80-HHC of the Income-Tax Act.

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