In response to the surging shipping rates triggered by Covid-19 and the Red Sea crisis, exporters have urged the Indian government to develop Indian shipping lines of global repute to boost exports. This appeal was made during a pre-Budget consultation meeting chaired by Finance Minister Nirmala Sitharaman on Tuesday, where traders also requested a reduction in duty on imports of precious metals to mitigate the decline in gems and jewellery exports.
As per the reports and details of the meeting, Federation of Indian Export Organisations (FIEO) President Ashwani Kumar proposed that the government extend the Interest Equalisation Scheme (IES) for five years to compensate exporters for a portion of the interest on loans. He emphasised that developing an Indian shipping line could significantly reduce the country’s outward remittance on transport services, which totaled over USD 109 billion in 2022.
“We request a focus on developing an Indian shipping line of global repute. India’s outward remittance on transport services is increasing with rising exports. As the country moves towards the goal of USD 1 trillion in goods exports, this will touch USD 200 billion by 2030. A 25 per cent share by the Indian shipping line can save USD 50 billion annually. This will also reduce arm-twisting by foreign shipping lines, particularly of our micro, small, and medium enterprises (MSMEs),” Kumar stated at the meeting.
Following recent attacks in the critical Red Sea shipping route, Asia-to-North Europe rates more than doubled to above USD 4,000 per 40-foot container. Exporters have complained about arbitrary additional surcharges during these critical times, which exacerbated export challenges. Indian goods exports dropped nearly 5 per cent in the last financial year due to declining demand from Western countries.
Kumar highlighted the importance of the IES, which is set to expire on June 30, 2024. He recommended restoring subvention rates from 3 per cent to 5 per cent for MSME manufacturers and from 2 per cent to 3 per cent for all others concerning 410 tariff lines, citing the rise in interest rates due to the increase in the repo rate from 4.4 per cent to 6.5 per cent over the past two years.
Exporters also advocated for increased funding for research and development (R&D), noting that 35 out of 38 Organisation for Economic Co-operation and Development (OECD) countries offer either lower tax rates or higher deductions on R&D expenditures. “We request that the weighted tax deduction under Section 35(2AB) be increased to 250-300 per cent and that the benefit under Section 35(2AB) be extended to Limited Liability Partnerships (LLPs), Partnership Firms, and Proprietary Firms, as MSME units largely fall into these categories,” FIEO stated.
Gem and Jewellery Export Promotion Council (GJEPC) Chairman Vipul Shah highlighted the significant decline in gems and jewellery exports, which dropped 30 per cent in the last financial year and have already decreased by 15 per cent this year. Shah called for the removal of the equalisation levy for rough diamonds and a reduction in import duty on gold bars from 15 per cent to 4 per cent to increase working capital for the industry. He also recommended reducing import duties on silver bars from 10 per cent to 4 per cent and on platinum bars from 12.5 per cent to 4 per cent.
“Untapped export potential for gold jewellery can be realised with more working capital (at least USD 2 billion of USD 11 billion in a medium period of 2 years),” Shah asserted.
The exporters’ proposals aim to address the dual challenges of high shipping costs and declining precious metal exports, positioning Indian industries for growth and global competitiveness.
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