Government to review export credit

The government, he said, is concerned over export performance which witnessed a fall of 7.54 per cent during April-May 1998. During May alone, exports recorded a negative growth of 17.22 per cent. The export growth in 1997-98 was a dismal 2.64 per cent compared with double-digit growth rates in the previous three years.

It is learnt that the Reserve Bank of India is likely to change its rules governing cheap credit to exporters following complaints from tradinghouses. Under present rules, exporters are entitled to pre-shipment export credit at 11 per cent per annum. The concessions are extended sharply if exporters exceed their 1997-98 sales.

These incremental exports entitle trading houses to credit at 6.5 per cent. Under these rules fixed on June 11, spreads (over Libor) to be charged on preshipment credit in foreign currency (PCFC) were also fixed at a maximum of 1.5 per cent for all exports.

Bankers said exporters were unhappy with these rules as many of them were unable to avail of the credit on incremental exports and it was likely the RBI would change them.

Granting the maximum concession to those exceeding their previous figures meant that some were rewarded for doing badly last year, said an exporter. “For some exporters, 1997-98 had been a boom year, and ironically it is those who did badly who stand to benefit by this scheme, since they can easily exceed last year’s numbers,” said an exporter.

With the economic downturn and the sharp fall inother Asian currencies, Indian exporters have found it tougher to compete in international markets and it was unlikely they could exceed last year’s figures, a commodities exporter said, adding, “Few exporters will be able to touch the 1997-98 levels, leave alone exceed them.”

Centre for Monitoring Indian Economy (CMIE) has projected an export growth rate of 5.00 per cent in 1998-99. Bankers said they had met the RBI and suggested alternatives because the existing scheme of export credits was not viable.

Varying methods of computing export performance with trading houses being allowed to calculate their figures either on a quarterly, half-yearly or annual basis had deepened the confusion, said a banker. Exporters have said the dual rate structure should be done away with and a single rate be granted for all exports.

The export growth target of 20 per cent in dollar terms for the current financial year is unlikely to be achieved in view of the 2.2 per cent growth in April and 10 to 12 per cent negativegrowth in May, says the Associated Chambers of Commerce and Industry of India (Assocham).