Develop National Shipping, Reduce Precious Metal Duties, Exporters Tell Government in Pre-Budget Meeting

At a pre-Budget consultation meeting chaired by Finance Minister Nirmala Sitharaman on Tuesday, exporters urged the government to develop Indian shipping lines of global repute to boost exports. They also requested a reduction in duty on precious metal imports to counter the decline in gems and jewelry exports.

Ashwani Kumar, president of the Federation of Indian Export Organizations (FIEO), suggested extending the Interest Equalization Scheme (IES) for five years. This scheme compensates exporters for a portion of the interest on loans. Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), called for the removal of the equalization levy on rough diamonds, noting that gems and jewelry exports dropped by 30% last financial year and have already fallen by 15% this year.

Kumar highlighted the need for an Indian shipping line of global stature, pointing out that India spent over $109 billion on transport services in 2022. With the country’s goal of reaching $1 trillion in goods exports, this amount could reach $200 billion by 2030. An Indian shipping line with a 25% market share could save $50 billion annually, reducing dependence on foreign shipping lines, particularly for micro, small, and medium enterprises (MSMEs). Following attacks on the critical Red Sea shipping route, Asia-to-North Europe shipping rates more than doubled to over $4,000 per 40-foot container. Exporters criticized the arbitrary surcharges imposed during these times, which hindered exports. Indian goods exports fell by nearly 5% last financial year due to reduced demand from Western countries.

Kumar emphasized the importance of the IES in supporting exports and called for its extension beyond its current expiration date of June 30, 2024. He suggested restoring subvention rates to 5% for MSME manufacturers and 3% for other exporters due to rising interest rates driven by the increase in the repo rate from 4.4% to 6.5% over the past two years.

Exporters also requested increased funding for research and development, noting that 35 out of 38 Organisation for Economic Co-operation and Development (OECD) countries offer lower taxes or higher deductions for R&D expenses. The FIEO recommended increasing the weighted tax deduction under Section 35(2AB) to 250–300% and extending this benefit to limited liability partnerships (LLPs), partnership firms, and proprietorship firms, which encompass many MSMEs.

Shah proposed reducing import duties on gold bars from 15% to 4%, arguing that this would release around Rs 982.16 crore in duty blockages, providing more working capital for the industry. He also suggested lowering import duties on silver bars from 10% to 4% and on platinum bars from 12.5% to 4%. Shah emphasized that India’s gem and jewelry industry, which relies heavily on imported raw materials like gold, diamonds, silver, and colored gemstones, employs approximately 4.3 million people, contributes about 10% to the country’s merchandise exports, and plays a significant role in overall economic growth.

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