The Federation of Indian Export Organisations (FIEO) has asked the Union Government to take necessary steps to stabilize the fluctuating dollar rates against rupee. The exporters informed that the declining value of dollar against rupee is badly affecting the foreign exchange earnings of the industry. The federation wanted the central government to direct Reserve Bank of India to open a dollar account to lend dollars to Indian Banks at London Inter Bank Offered Rate (LIBOR), the rate on dollar-denominated deposits. The banks should finance Indian exporter at LIBOR + 0.75 basis as per RBI rules, the federation has suggested.
The FIEO on Wednessday organized a brain storming session with the senior representatives of the Government sponsored export promotion bodies and experts from the academic and the banking sector to arrive at the possible suggestions/alternatives to solve the problem of continued depreciation of dollar value against rupee.
Speaking to Pharmabiz.com, Ajay Sahay, Director General, FIEO, informed that the Ministry has assured to take suitable measures to ensure export growth amidst the appreciating rupee.
The Federation has asked the government to give directives to the banks to first meet the requirements of foreign currency funds of exporters and then only extend FCNR(B) loans to corporate who are not exporting. (Non-availability of dollars to exporters is attributed to the fact that corporate who may be exporters or otherwise are also sourcing the FCNR funds because of its very low interest structure and banks finding it safer to lend corporate).
Introduction of freight subsidy where in 50% of the freight is reimbursed if the freight value is 2% of the FOB value of exports thereby offsetting the transaction cost to some extent, reinstating of Section 80 HHC to allow 100% exemption on export profit, were some of the suggestions put up by FIEO.
It is known that if the present trend continues and the rupee will continue to gain in the coming months, India's realization of foreign exchange earnings is going to be 10 to 15 per cent lower from pharmaceutical exports just because of the rupee value erosion.