FIEO hails RBI moves to boost exports

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SME Times News Bureau | 23 May, 2014
Announcement by the Reserve Bank of India (RBI) to allow long term export advances and relaxation in gold import norms may help project and turnkey export sector, said M Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO) in a press statement Friday.

RBI on Wednesday allowed banks to provide loans with tenures of up to 10 years to exporters to help them ensure capital flows to fulfil long-term contracts, reports media. Existing norms allow banks to give loans for up to one year only.

"Allowing exporters to receive long term export advances up to a maximum tenor of 10 years to be utilized for execution of long term supply contracts for export of goods would be particularly useful to those exporters who are into turnkey projects/ off shore prospecting etc. which requires both service and capital exports over a longer period of time/extended gestation period as could also be required for infrastructure projects being implemented by State agencies like IRCON/RITES/WAPCOS," said Ahmed.

Also on same day RBI has eased gold import norms by allowing select trading houses, in addition to already permitted banks, to procure the precious metal to boost exports.

While commenting on the RBI's recent directive allowing Star Trading Houses/ Premier Trading Houses (STH/PTH) which are registered as nominated agencies by the Director General of Foreign Trade (DGFT) to import gold under 20:80 scheme subject to conditions such as these nominated agencies should have imported gold prior to the introduction of 20:80 scheme and a cap that the first lot of gold under this scheme would be based on the highest monthly import during any of the last 24 months prior to the RBI's notification dated August 14, 2013, said Ahmed.

"Subject to a maximum of 2000 Kgs stated that this would provide some relief to the exporters of gold jewellery from the sector which because of low availability were allowed to import only on consignment basis resulting in a decline of -32.99 percent ( in rupee terms) and -39.57 percent (in USD terms) in 2013-2014," he added.

FIEO chief stated that RBI could consider incentivizing those exporters who show a larger commitment to exports as against the stipulated 20 percent by allowing a commensurate increase in the import cap assigned to them.

FIEO Chief further stated that given that India is a major consumption centre gold future have seen a jump following the announcement. The announcement of allowing STH /PTH also reflects that resolve of the New Government towards free market economics as against a canalized/restricted regime in order to propel business both within the country and outside, he added.

RBI in July last year had imposed severe restrictions on gold imports in order to check burgeoning current account deficit and sliding rupee. The central bank had tied imports with exports and prescribed a 20:80 formula. This facility was available to select banks only and other entities were barred from importing the metal.