Government to extend export exemption for businesses dealing in rupees

Exporters settling their trade in rupees will soon be able to take advantage of export incentives and duty exemptions under India’s foreign trade policy, which promises to boost shipments to countries like Russia. According to a government official with knowledge of the matter, the Directorate General of Foreign Trade (DGFT) may soon issue a clarification in this regard after the approval of the Union Finance Ministry.

At present, exporters are given incentives in the form of duty drawback, export incentive capital goods (EPCG) incentives, and exemption on duties and taxes under various government schemes like Remission of State and Central Taxes and Levies (ROSCTL) and Remission of Duties and Taxes. . Export products (RODTEPs) are available only when payments or export receipts come in freely convertible currencies, including the dollar, British pound, euro and yen, while the rupee is not a freely convertible currency. With clarifications, the Foreign Trade Policy (FTP) will be suitably amended so that exporters can claim export benefits for settling trade in Rupees.

“We will come out with a clarification soon… It is a valid issue raised by the exporters. This is a competent provision. We are working with the finance ministry towards a clarification,” the above government official said on condition of anonymity.

Questions emailed to the Department of Commerce remained unanswered as of press time.

According to reports, Gazprombank of Russia has opened a special rupee account with state-owned UCO Bank. In July, the Reserve Bank of India introduced a rupee settlement system for international trade, where invoicing, payment, and settlement of exports and imports to all countries, upon approval of the central bank, could be in Indian rupees. Banks will need RBI approval to use the mechanism. Under this mechanism, exporters and importers can access a special Vostro account linked to the correspondent bank of the participating country for receipts and payments denominated in Rupees.

RBI said last month that it has received good response from four-five countries and several banks to settle bilateral trade in rupee, and it is taking time as the process involves a lot of work at the level of banks, central banks and governments. investigation is included. ,

According to a study by India’s apex trade promotion body Federation of Indian Export Organizations (FIEO), India’s shipments to sanctions-hit Russia could rise to $5 billion once the rupee settlement mechanism is functional. It said agricultural products, food, pharma and engineering equipment are the key sectors where India can see an increase in exports to Russia.

With supplies from the EU almost shutting down, especially for industrial and engineering goods, this could be a huge opportunity for India.

The mechanism also aims to facilitate trade with countries under sanctions such as Iran and Russia. India’s exports to Russia have easily contracted in August to 4.72% over the previous year, from a 13.1% drop in July. New Delhi’s exports to Moscow fell 24% to $992 million in the April-August period.

FIEO President A. “We expect the government to clarify the benefits on such exports in rupees, which so far have been given only for export payments received in foreign currency,” Sakthivel said.

Exporters are asking the government to extend export benefits from incentive schemes like RoDTEP and EPCG, if the trade is settled in Rs.

Imports from Russia rose 414% to $17.23 billion in the first five months of the current fiscal year. Although crude oil imports accounted for 85% of the total imports from Moscow, shipments of sunflower oil, fertilisers, silver, printed books, coriander seeds and furniture items registered a sharp increase, suggesting that New Delhi continues to grow in Russia. building business relationship with.

According to trade experts, RBI’s move to allow international trade transactions in rupee could also ease trade flow with BRICS countries-Brazil, Russia, China and South Africa and impose sanctions on Iran, But implementing the new settlement mechanism may not be easy. ,