India to cut export transaction costs by Rs.2,100 crore

NEW DELHI - India Tuesday announced a series of measures, including round-the-clock customs clearance at eight ports and reduction in levies, that will cut export transaction costs by nearly Rs.2,100 crore ($466.66 million) and make the country’s overseas trade more competitive.

Finance Minister Pranab Mukherjee released a report of the task force on transaction costs that has made 44 recommendations aimed at improving competitiveness of Indian exports.

Transaction costs constitute nearly 7-10 percent of the total value of Indian exports.

“Reducing transaction costs and time in foreign trade requires support of all concerned ministries and departments as the value chain of the foreign trade transaction cuts across various inter-connected processes,” Mukherjee said after releasing the report here.

The government has agreed to implement 32 of the 44 identified issues that are related to various ministries and departments, said Minister of State for Commerce and Industry Jyotiraditya M. Scindia.

“Of these, 21 issues have been implemented and another two are likely to be implemented in a couple of months. The remaining issues are under the process of examination and consultations for implementation,” said Scindia.

“It is expected that implementation of 23 issues is likely to mitigate the transaction costs by approximately Rs.2,100 crore. Permanent reduction of transaction costs through these initiatives will have a long-term positive impact on the competitiveness of India’s exports,” added Scindia, who chaired the task force.

The major recommendations that have been implemented include, round-the-clock customs clearance at eight ports - Visakhapatnam, Kolkata, Jamnagar, Mangalore, Jawaharlal Nehru Port Trust (Navi Mumbai), Mumbai, Bhubaneswar and Chennai - and reduction in various levies.

Booking charges for the foreign currency have been reduced from Rs.750 per transaction to Rs.400-500 per transaction.

The Delhi International Airport has reduced the charges levied for screening express cargo and courier shipments from Rs.6 to Rs.1.65 per kg at its Express Courier Terminal at Indira Gandhi International Airport.

Leading banks have agreed to extend pre-shipment credit in foreign currency at London Interbank Offered Rate (Libor) plus two percent with no additional charges levied.

The Reserve Bank of India has instructed all commercial banks to ensure that post-shipment credit is available at prescribed rates up to 180 days as stipulated in case of overdue bills.

While welcoming the move, industry associations urged the government to implement the other recommended measures.

“The report has addressed 25 percent of the total addressable transaction costs. Further momentum and efforts are required to address the remaining issues,” said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry (FICCI).

Mitra said that given the revenue constraints, the move to cut transaction costs was a welcome step forward.

“I am confident that its findings and recommendations would form a basis to initiate more measures towards facilitating trade and doing business. Permanent reduction of transaction costs through these initiatives will have a long term positive impact on the competitiveness of India’s exports,” Mitra added.

Welcoming the move, Confederation of Indian Industries’ (CII) director general Chandrajit Banerjee said: “Reducing transaction costs is the key to export development as global competitiveness today depends on being able to be a low-cost producer and at the same time, a reliable supplier.”