Engineering exports to miss $72 bn target: EEPC

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Namrata Kath Hazarika | 13 Mar, 2012
Engineering exports from the country are likely to miss the target set for the current fiscal and touch around USD 62 billion by the March-end on account of slow demand pick up in the key export destinations.

Aman Chadha, Chairman, Export Engineering Promotion Council (EEPC) said, "The demand actually started picking up from December onwards due to the Christmas sales and demand from the western countries. The last three months i.e. January, February, and including March has been better for the engineering exports as compared to the months of September, October and November."

"Actually, when we started the fiscal 2011-12, we had high growth in exports of engineering products. But, this growth rate declined later and had come down considerably. This was due to the sluggish market conditions especially in the Europe and US." he told SME Times.

EEPC's data stated that India’s engineering exports in April 2011 was around USD 5 billion which further grew to USD 6 billion in May. But due to crisis in the western countries, exports started declining since then and this negative growth lasted till the month of November touching to USD 3.8 billion, a decline of 37 percent.

However, growth in exports from the sector started picking up once again from the month of December reaching USD 4.6 billion. In January and February, exports reached around USD 4.73 billion and USD 4.79 billion, respectively.

According to the Council's latest data available, the first 11 months of the fiscal 2011-12 (April 2011 to February 2012) engineering exports grew by 20.9% to USD 54.5 billion over the same period in 2010-11.

Overall, Chadha pointed out, it will be difficult for the engineering exports to touch the target of USD 72 billion for the 2011-12 on account of sluggish demand in major markets like the US and Europe.

He said that besides the US and European markets, the Council is also requesting exporters to explore new markets. "Last year, we have visited Turkey and Canada to explore business opportunities. This year we will visit Japan to see what opportunities we get there for engineering products. We will also visit Czech Republic this year." he added.

On the budget recommendation, the Council urged the government to provide interest subvention scheme for rupee export credit to the entire engineering sector for the next fiscal year.

It also stated TDS on foreign agents commission up to 12.5 percent of FOB value should be exempted; it also demanded to continue and strengthen credit linked capital subsidy scheme (CLCSS) on which 15% capital subsidy is given to MSME’s by increasing the limit to Rs 5 crore from the present Rs 1 crore and the exemption for service tax on foreign agency commission is allowed but limited to 1% of FOB value of exports goods. “The limit should be raised to 1.25% of FOB value of exports goods in line with what the RBI allows for claiming duty benefits,” said EEPC.

Further, Chadha also said that new markets should also be included under Focus Market Scheme and Focus Product Scheme as there are potential opportunities in Myanmar, South Africa, Brazil and few countries in both the US and European markets. In ASEAN countries, focus should also be given to markets like Vietnam and Cambodia.

On the indirect taxes, he said that the government should not increase the excise rates from present 10 percent in budget this year. The Technology Upgradation Funds (TUFS) for the sector should be given at lower cost of credit, Chadha added.