Reducing cap on free exports for promotion to hit innovation: Exporters

Himanshu Vatsa | The Dollar Business

The government, on Thursday, restricted free exports of goods by large exporters for promotional activities to Rs.10 lakh. “Status holders shall be entitled to export freely exportable items on free of cost basis for export promotion subject to an annual limit of Rs.10 lakh or 2% of average annual export realisation during preceding three licensing years, whichever is lower,” stated the notification issued by the Directorate General of Foreign Trade (DGFT). Earlier, the cap was Rs.10 lakh or 10% of the annual export value, whichever is higher. Exporters feel the move will not only hamper India’s manufacturing growth but will also restrict innovation. “The new rule will mainly affect merchandise exports, particularly textile and home furnishing sectors. If export for promotion is restricted, we will not be able to exhibit our innovations in the international market,” said Tilak Raj Manaktala, President of Delhi Exporters’ Association. He believes that the new rule will definitely hamper India’s merchandise exports and scope of innovation in manufactured goods category. “Competitiveness of all manufactured goods largely depends on planned production and planning is based on innovation. On an average, if we send 100 samples of any product in the international market, only two of them get picked up,” he told The Dollar Business. The exporters’ body will approach the commerce ministry and demand for the roll back of the new order, Manaktala added. Meanwhile, the Handloom Export Promotion Council (HEPC) has also admitted that the notification will affect manufacturing and innovation. “Practically it will affect business. If there is a limit then every time we have to furnish an undertaking to the government for compliance,” Gagan Rai, Chairman of HEPC, told The Dollar Business. The HEPC has also decided to take up the issue with the government. “We will take up the issue with the government requesting them to reinstate the provision as annual limit of Rs.10 lakh or 2% of average annual export realisation during preceding three licencing years whichever is higher,” Rai added.    

June 05, 2015 | 8:19 pm IST.