Exporters' body Federation of Indian Export Organisations (FIEO) Tuesday said duty drawback on diesel to offset increasing costs of production and rationalization of interest rates is necessary for the export sector.

To offset the higher costs of production drawback on diesel/FO as was being given earlier may be re-introduced so as to impart competitiveness to exports. Rationalisation of interest rates is also necessary to ensure that manufacturing is given the necessary support, said FIEO president M Rafeeque Ahmed in a press statement.

Wholesale Price Index inflation rose 70 basis points (month-on-month), indicating that inflationary pressures are far from being contained, also the food inflation which had been brought down to levels less than 7% has taken a hammering because of increase in diesel prices and will have a cascading effect on all sectors of the economy besides hitting manufacturing severely, he pointed out.

In June manufacturing had contracted to -1.8% ,the July figures show a 0.1% increase, given the fact that availability of power is a major bottleneck for industry and a large number of units across sectors make do by using diesel gensets, costs of production will further escalate, he added.