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Panel to suggest steps to lower transaction cost for exporters

Last Updated: Thursday, March 7, 2013 - 19:17

New Delhi: Worried over widening trade deficit and declining exports, the Commerce Ministry has set up a committee to suggest steps to reduce transaction cost with a view to make shipments more competitive.

"The committee is chaired by Minister of State for Commerce and Industry D Purandeswari. It will submit its report within three months. It would examine the problems faced by exporters that pushed their transactions costs," a top official in the Commerce Ministry said.

The committee also comprised officials from the Director General of Foreign Trade (DGFT) and industry players.

"Exporters are bearing the brunt of high transactions cost. It is severely affecting the country's exports," the official said.

According to industry experts, the quantum of transaction cost is about 7-10 per cent of the total value of Indian exports. This amounts to a significant USD 15 billion.

Further, average cost to an exporter on account of transaction cost has been monetised at a level of USD 945 per container as compared to USD 460 in China, USD 450 in Malaysia and USD 625 in Vietnam.

"These figures clearly reflects the burden of transactions cost on exporters. It needs to be eliminated in order to boost exports and reduce trade deficit," Apparel Export Promotion Council Chairman A Sakthivel said.

Marking a recovery after a gap of eight months, India's exports grew by a marginal 0.82 percent in January, but trade deficit widened to around USD 20 billion, the second highest figure ever in a month.

However, during April-January period, overseas shipments shrunk by 4.86 percent to USD 239.6 billion.

The official said although a task force in 2011 had announced few measures to reduce the cost, but those steps have not been implemented completely.

"There is an urgent need to relook on all those measures," the official added.

The Current Account Deficit (CAD), which occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers, continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports.

The CAD had touched a record high of 5.4 percent of GDP in the July-September quarter.

Apex exporters body FIEO suggested that complete electronic flow of all the relevant documents will help in reducing the cost substantially.

"Currently about 13 agencies are involved in exports that include DGFT, banks, RBI, customs and chambers. But the flow of document is not smooth among them.

This puts additional burden on exporters. Full Electronic Data Interchange will help exporters a lot," FIEO Director General Ajay Sahai said.

In 2011, the government had announced 21 steps like round-the-clock customs clearance at eight major ports, reduction in bank charges on foreign currency and concessional loans to cut transactions cost.


First Published: Thursday, March 7, 2013 - 19:11
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