Budget OK; but crucial export issues yet to be addressed by Govt: JK Jain

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Saurabh Gupta | 09 Mar, 2013

At this difficult time, major issues like allocating 50% of the export credit to micro, small and medium enterprises (MSMEs), cap on service charges, also a cap on packing credit foreign currency (PCFC) for MSMEs, issue of cost of credit and aggressive marketing initiative are dire and need to be addressed in the upcoming Foreign Trade Policy (FTP) to be announced next month, Vice President FIEO and Jt. M.D., LMJ International Ltd, J. K. Jain told SME Times in an exclusive interview.

Excerpts of the interview...

As Vice President, FIEO, what are your first readings on the Budget?
J. K. Jain: The budget can be described as a solid, sound and credible and clearly addresses the needs of the whole development process including sustainable growth.

What would you have wanted to hear from the Hon'ble Finance Minister?
J. K. Jain: The ground reality is, in-spite of a very well structured budget that flirted with the government to narrow the fiscal deficit gap, India still seeks a structure so that the macroeconomic policy has a clear path for deficit reduction. Our main focus is on inflation rate. Besides, budget has not addressed the issue of cost of credit and aggressive marketing initiative required at this difficult time. We hope that finance minister will liberally consider such demand when foreign trade policy would be announced next month.

How you analyze the various measures announced for strengthening infrastructure, which will also facilitate exports, such as investment in two new ports in West Bengal and Andhra Pradesh, new outer harbour at Tuticorin, strengthening inland waterways and expediting Delhi-Mumbai industrial corridor as well as launching of Bangalore-Mumbai industrial corridor?
J. K. Jain: The above mentioned will surely facilitate exports. Frankly, India needs a sustained policy for continual improvement in it infrastructure. India is a country where infrastructure has been a bottleneck in exports which incurs transaction costs.

"Exporters should explore new markets and new buyers in existing markets to take full advantage of the depreciation of the rupee while simultaneously increasing their productivity through efficiencies and cost cutting measures as a long term strategy to survive in the world market."

In scale of 1 to 10 how would you rate the Union Budget 2013?
J. K. Jain: I would give it a rating of 7 out of 10 as coming from the import export of agro based commodities sector, I did not see any extravagant changes in the policies. Also, as I have already mentioned, budget has not addressed the issue of cost of credit and aggressive marketing initiative required at this difficult time. Also, though the news of reduction of Securities Transaction Tax (STT) for mutual funds was taken in high spirits, but the introduction of commodities transaction tax played a spoilsport to the investors.

As you said . . . despite the slowdown in demand in major global markets, this Budget has not addressed the issue of cost of credit and any marketing initiatives for exporters. Now, what reforms are you looking at the upcoming Foreign Trade Policy to be announced next month?
J. K. Jain: The stagnating levels of export credit and its declining share as a percentage of net bank credit has come down to 3.7% as against the desired level of 12% stipulated by RBI. There is a dire need to allocate 50% of the export credit to MSMEs; export credit disbursal by banks should be subject to independent audits and reports of the same need to be made public; service charges need to be capped. Also a cap is required for packing credit foreign currency (PCFC) for MSMEs as foreign currency loans for pre-shipment are out of reach of MSME exporters due to higher costs and lower availability. These issues are yet to be catered to and we hope this will be done next month in the foreign trade policy.

Let's talk about LMJ International Ltd. Please give an idea about your group.
J. K. Jain: We are a "Star Trading House" formerly a four star export house, conferred by Commerce Ministry, Government of India. Several times winner of the renowned national award "Niryat Shree" from the President of India, excellence awards from APEDA, this ISO 9001:2000 organization has taken massive strides in export-import of agricultural commodities and creating state of the art processing and warehousing facilities.

Our major interest areas have been in tea, coffee, rice, wheat, maize, soybean, spices, sugar, millet, bajra, ground nuts, guar gum, cashew nuts, rape seed meal etc. and importing edible oil & pulses. The large scale of operations, production, processing, warehousing and logistics are spread over the length and breadth of the country.

LMJ International has expertise in managing plantations of tea, coffee and other products. Our tea plantations are spread over 3000 hectares of land and has an annual tea production of over 3 million kgs with a massive expansion plan that is estimated to touch 8 million marks in next three years. We have our own coffee estates in Coorg, Karnataka.

Another group company - LMJ Logistics is into third party logistics, C&F and warehousing activities for reputed clients all over India. The clients include some of the most reputed names nationally and internationally like Tata Motors, Good Year, Bayer, Mahindra & Mahindra, Usha Martin, Maruti, Carborundum etc. We have about 4.5 million sq ft. (45 lakh sq ft) of warehousing space all over India. We have an expert panel and a dedicated research team that works in the field of agri commodities like tea, coffee, pulses, oil seeds and cereal crops and guide us for future expansion.

LMG group is a 1000 crore conglomerate with total employee strength of more than 3000 people in 14 branch offices who coordinate warehouse facilities and gardens, sourcing, processing, logistics and marketing activities for the group. International office in Dubai support exports to African and Gulf countries.

Being an exporter what is the biggest issue that sector is facing at present?
J. K. Jain: Decline in the exports is due to the global trade slowdown and deceleration in domestic manufacturing. Many countries in the world are facing a huge setback and India is no exception to this. The softening of crude and metal prices have their share in reduced value-wise exports of petroleum products, gems and jewellery and engineering. Exporters should explore new markets and new buyers in existing markets to take full advantage of the depreciation of the rupee while simultaneously increasing their productivity through efficiencies and cost cutting measures as a long term strategy to survive in the world market.

You are in export-import of agricultural commodities. If I go to Rail Budget, I have found Railway Minister, Mr. Pawan Kumar Bansal proposed to raise the rail freight charges across the board by an average 5.8 percent for grains, groundnut oil, coal, iron, steel etc. How much this will be going to affect exports?
J. K. Jain: Railway Minister Hon'ble Shri Pawan Kumar Bansal has proposed to raise the freight charges across the board by an average 5.8 per cent. Increase in freight rates would add on to the cost of inputs. Movement of goods meant for exports to the ports is mostly via railways. Increased cost will reduce our profit margin further.

Definitely the hiked rail freight charges will increase the input costs. Do you agree that this increased cost will reduce exporter's profit margin further and impact their demand? Your point.
J. K. Jain: Yes, as I said increase in freight rates would add on to the cost of inputs at a time when there is a general slow-down in the economy. Increased cost will reduce our profit margin further and impact our demand.