With buyers demanding credit for a longer period, exporters have been clamouring for cheaper credit for a period beyond the present 90 days allowed by banks and a waiver of penal interest.
Giving interest rate subvention (a subsidy on interest charged by banks on loans to exporters) to exporters in some labour incentive sectors is top on the government’s agenda. A subvention of 2% on pre-shipment and post-shipment credit was given to exporters from nine identified sectors last year in July when they were hit by the appreciating rupee. The incentive was withdrawn in September this year. “The government is exploring the possibility of extending similar sops to sectors such as textiles, leather, gems & jewellery, carpets and handicrafts,” another official said.
Exporters have also been complaining about letters of credit not being honoured by banks in the country which is adding to the problems. “We will see if banks can be asked to honour all letters of credit. There is risk involved, but exporters cannot be left in the lurch in their hour of crisis,” the official added.
Incentives could also be given to exporters to explore alternative export destinations in Asia and the Middle East as they have been less affected by the financial crunch. India had set an export target of $200 billion this fiscal which now seems unlikely to be met.