Measures to promote MSME export on anvil

New Delhi: The government is contemplating additional incentives for the MSME sector with a view to boost exports and to help arrest the decline in value of rupee, which has breached 63 to a dollar mark Monday.

"The Committee of Secretaries (CoS) will meet tomorrow. Officials from DIPP will be there to discuss the report of the Inter-Ministerial Committee for boosting exports from MSME sector," an official said.

He further said the CoS would meet again with various ministries, including Ministry of Labour and Employment, on Thursday and Friday for the implementation of the report.

"The CoS will also discuss the modalities for setting up of an Export Development Fund," the official said.

The six-member inter-ministerial committee headed by Finance Secretary R S Gujral has already submitted its report. The committee was constituted by the Cabinet Secretary to suggest short and medium term measures to enhance exports from the Micro, Small and Medium Enterprise (MSME) sector.

"We should create an Export Development Fund so as to support them on this front. The corpus of the fund should be 0.5 percent to 1 percent of export value so that sizable money is available to promote MSME exports," the panel had recommended.

The report had suggested fiscal and non-fiscal incentives including enhanced interest subsidy of 4 percent from the existing 3 percent, to boost exports from MSME sector.

With rupee touching a record low of 63.30 to dollar, the government is looking at ways to increase inflow of foreign exchange into the country and is taking measures to boost export.

The CAD - the difference between inflow and outgo of foreign currency - touched a historic high of 4.8 percent of GDP in 2012-13, mainly on account of increasing imports and declining exports.

The Committee has, however, suggested that the incentives should be limited for a period of five years in view of the need to curtail fiscal deficit.

"...A number of recommendations would increase the budgetary expenditure/reduce tax revenue and consequently add to the strain on fiscal deficit...(it) has suggested that the benefit may be limited to a period of 5 years," it added.

It has recommended that export credit limit to MSME units may be increased by 20 percent automatically and alternatively credit limits could be set in US dollars wherever possible.

It said that banks should aim at earmarking 40 percent of export credit for MSMEs and the buyer's credit limit under automatic route should be increased from USD 20 million to USD 50 million.

The committee has also suggested relaxation of RBI's external commercial borrowings norms, to allow all categories of MSME engineering exporters to raise ECBs for import of capital goods and equipment.

PTI