Exports will show a drastic fall if DEPB stopped: FIEO

On concerns that the DEPB is not compliant with World Trade Organisation rules, the government has announced discontinuation of the same from 30th June this year. Exporters have opposed the move and have been pleading with the government that either the scheme should remain intact or be replaced by an alternative

New Delhi: India’s exports will drop to USD 200 billion in the current fiscal if sops under the Duty Entitlement Pass Book Scheme (DEPB) duty neutralisation scheme are withdrawn, the Federation of Indian Export Organisations (FIEO) cautioned today, reports PTI.

The government has set an export target of $312 billion for 2011-12, pegging growth at 26.7% vis-à-vis the 2010-11 achievement, as highlighted in the commerce ministry’s strategy paper.

The country had registered an impressive growth of 37.5% in overseas merchandise shipments in 2010-11, which reached $246 billion, against a modest target of $200 billion.

“If there is no continuation of DEPB, exports will fall to $200 billion,” FIEO president Ramu S Deora said here.

Under the DEPB, the incidence of customs duty on import content of export products is neutralised and reimbursed to the exporters.

Several key industries like engineering, including automobiles, have been the major beneficiaries of the scheme.

On concerns that the DEPB is not compliant with World Trade Organisation (WTO) rules, the government has announced discontinuation of the same from 30th June this year.

Exporters are opposed to the move and have been pleading with the government that either the scheme should remain intact or be replaced by an alternative.

The annual payout on this head to exporters is Rs8,100 crore.

Mr Deora said when the government had announced that DEPB would be discontinued from June; it assured exporters that they would benefit from the proposed Goods and Services Tax (GST).

“GST is now delayed... Either the DEPB should be extended, if not, all the products covered under it may be brought under the all-industry drawback scheme in the same rates. The government must announce it immediately, otherwise we will lose orders,” the FIEO chief said.

He said Indian exporters, if outpriced by competition, will be forced to vacate the markets nurtured by them for many years.

Expressing concern over bans and restrictions on export of certain commodities like cotton, Mr Deora said that whenever the country is faced with domestic shortages, the sensible way would be to put an export cess, rather than curbing shipments.

On hike in key interest rates, Mr Deora said he favours the Reserve Bank of India’s (RBI) efforts to curb inflation but “there should be a distinction between export finance and domestic finance”.

He said the rate of interest for micro, small and medium sectors should not be more than 7% as they contribute almost half of the country's total exports.

“In exports, competition is not from within but from nations where the credit is available at less than 5%.

If Indian exporters get credit at 10.5%-11%, they will be totally outpriced in global markets,” he added.

On credit rating for small and medium enterprises (SMEs), he said, there are no separate guidelines for SMEs and the criteria does not allow such firms to get good rating, as a result financing from banks becomes more difficult.


Templeton Strategic invests close to $18 million in Apar Industries

Templeton’s investment will fund Apar’s ongoing capacity addition program and strengthen its working capital

Templeton Strategic Emerging Markets Fund III LDC (TSEMF III) has concluded a $17.8 million (around Rs80 crore) investment in Apar Industries, India's largest manufacturer of transformer oils and the country's second largest manufacturer of conductors. Apar exports transformer oils and conductors to over 50 countries.

TSEMF III, which invests in listed as well as unlisted companies in emerging markets, is the third strategic equity fund managed by Templeton Emerging Markets Group, which is of Templeton Asset Management Ltd, an investment management company incorporated in Singapore which is part of NYSE-listed Franklin Resources, Inc.

Dr Mark Mobius, executive chairman of Templeton Emerging Markets Group said, "We are impressed with Apar's track record and capabilities which can be leveraged for Apar to play a meaningful role in strengthening the transmission and distribution networks in India. Templeton's investment will fund the company's ongoing capacity addition program and strengthen its working capital. This investment fits well with our global exposure to the infrastructure sector and we look forward to working with Apar's management and promoters to make this a landmark relationship."

Kushal Desai, managing director of Apar said, "Templeton's association with Apar is a huge vote of confidence in our business, processes and high standards of corporate governance. We look forward to Templeton's support and involvement in making our business standards truly global. We continue to grow globally with a special focus on the domestic market, which is among the fastest growing in the world."

TSEMF III is managed by Emerging Markets Group of Templeton Asset Management. Franklin Resources, Inc., the ultimate parent company of Templeton Asset Management, is a global investment management organisation operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series and Fiduciary Trust investment teams. 


Petrol prices may go up; diesel, LPG rates may follow

A hike in diesel and domestic liquefied petroleum gas (LPG) prices has been deferred for now, but state-owned oil firms are likely to get the go-ahead to raise the price of petrol, which they have not revised since January on informal ‘advice’ from the government in view of assembly elections in five states

New Delhi: The government may hike diesel and domestic LPG rates next week while an increase in petrol prices may happen later this week, reports PTI.

“The Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee (on fuel price hike) was to meet tomorrow evening. It has been put off,” oil minister S Jaipal Reddy told reporters here.

The EGoM was to meet tomorrow to consider raising the diesel price by Rs3-Rs4 a litre and domestic LPG rates by Rs20-Rs25 per cylinder.

“It has been postponed to accommodate some ministers...

It could be anytime on 17th or 18th (May),” he said.

State-owned oil firms, however, are likely to get the go-ahead to raise the price of petrol, which they have not revised since January on informal ‘advice’ from the government in view of assembly elections in five states.

“Petrol prices may be raised as early as Thursday-Friday night,” an official said, adding a steep hike of up to Rs3 per litre of petrol is on the cards.

The government had freed petrol prices from its control last June, but state oil firms continue to be guided by informal advice from the government.

The hike needed to take petrol prices to international parity is about Rs8.50 per litre, but the entire burden will not be passed on to consumers in one go.

“Oil companies will be asked to stagger the hike over a couple of months,” the official said.

Mr Reddy said the day EGoM meets on fuel prices, a separate Group of Ministers (GoM) that is vetting London-listed Vedanta Resources’ $9.6 billion acquisition of Cairn India, may also meet.

“I think when the next date is fixed on that day itself we will deal with both questions—the question of under-recoveries of oil companies and the question of government approval to Cairn-Vedanta deal,” he said.

State-owned Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation currently lose Rs16.17 a litre on diesel and after adding local sales tax or VAT, the desired increase to make rates at par with international prices is Rs18.19 a litre.

Besides petrol and diesel, the three state oil firms lose Rs29.69 a litre on kerosene and Rs329.73 per 14.2-kg domestic LPG cylinder.

Officially on the EGoM’s agenda was ways of mitigating the over Rs180,000 crore revenue loss state-owned oil firms have projected in 2011-12 on selling diesel, domestic LPG and kerosene at current rates.

The three firms will “at current international crude oil prices lose Rs180,208 crore in revenues on selling diesel, domestic LPG and kerosene below their imported cost in the 2011-12 fiscal,” the official said.

The revenue loss, termed as under-recovery by oil firms, will be the highest ever, even more than what they lost in 2008-09 when crude touched a record high of $147 a barrel.

In addition, they lose about Rs8.50 per litre on petrol, whose rates have not moved in tandem with the imported cost despite its pricing being freed from government control in June last year.

“Losses on petrol are not included in the under-recovery figures for 2011-12 as it is a decontrolled commodity,” the official said.

The basket of crude oil India buys had averaged $83.57 per barrel in 2008-09 and calculations for the current fiscal have been done at the prevailing rate of around $110 a barrel.

“The average price of the Indian basket of crude oil in the last fiscal was $85.09 per barrel, higher than the 2008-09 average when the government had cut customs and excise duty on crude oil and products to check the impact of rising international rates on domestic markets,” the official said.

Finance minister Pranab Mukherjee has refused to cut customs and excise duty on crude this time to protect his projected fiscal deficit.

“The situation in the current fiscal will be worse; the three PSU oil marketing companies are losing Rs540 crore per day on diesel, domestic LPG and kerosene sales,” he said.

In 2008-09, the government had issued oil bonds worth Rs71,292 crore to the three firms to make up for more than two-thirds of the Rs103,292 crore revenue loss. Upstream oil firms like ONGC provided another Rs32,000 crore.

In the 2010-11 fiscal, the three firms lost Rs78,202 crore, but so far, the government has provided only Rs 20,911 crore in compensation. The oil marketing firms lost Rs2,227 crore on selling petrol below the imported cost during April and June before its price was freed from government control.

They lost Rs34,384 crore on the sale of diesel, Rs19,566 crore on PDS kerosene and Rs22,025 crore on the sale of domestic LPG.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)