Traders vie for export boost and tax breaks

Leading trade-focused industries are hoping the 2021 Union Budget will have sops to help them tide over the effects of a global recession.

Industries that focus heavily on both exports and imports have made representations to finance minister Nirmala Sitharaman seeking sops, including duty drawbacks, an extension on tax breaks for export-oriented special economic zones (SEZs) and simpler rules on international e-commerce shipping.

“In light of the current economic condition and increasing global competitiveness, extending the sunset clause of the IT Act for SEZs will give a big boost,” Diwakar Nigam, chairman and managing director of Newgen Software, said in an interview. “The government can further incentivise organisations for creating software intellectual property through tax exemption on IT exports.”

“We have asked the government for export incentives in the form of a duty drawback,” said Manish Kharbanda, advisor-corporate affairs at Jindal Steel and Power Ltd, and president at Pellet Manufacturers Association of India.

“Earlier, under export promotion schemes, iron pellet makers received duty drawbacks of 2.5-3%. We want this to be restored as this will align with the government’s Make in India policy.”

Iron-ore pellet makers export 10-11% of their production, Kharbanda said. “There’s been a lot of talk on imposing an export duty on pellets, and we have explained that this is counter-productive as the domestic demand for pellets is not very high. The industry is still functioning at around 80% capacity, so if domestic demand goes up, we will still be able to meet it.”

Recent trade data backs the call for a government boost. With renewed curbs imposed by some trading partners causing exports to falter, India’s trade deficit rose to a 10-month high of $9.9 billion in November. Merchandise exports last month slumped by almost 8.7% to $23.5 billion against $25.77 billion in November 2019. The fall was largely led by petroleum goods, leather, marine products and engineering goods, while essential commodities such as rice, cereals, fruit and vegetables, meat and poultry, spices and pharma products continued to see growth.

Credit ratings agency Icra said it expects the size of the merchandise trade deficit to nearly double in October-December, compared with Q2, with imports recovering on the back of an improvement in economic activity, a rise in commodity prices and a pickup in demand for gold during the festive and marriage season.

“Simultaneously, the fresh curbs imposed by some major trading partners to ward off rising Covid infections, are likely to arrest the improvement in exports,” it added.

Another key sector for India’s contribution to the global trade basket is gems and jewellery, where India is the fifth-largest exporter globally.

Finally, e-commerce firms that sell directly to consumers globally are also looking for government support.