Govt. should form committee under Prime Minister for exporters: CIIJanuary 13th, 2009 - 11:25 pm ICT by ANI
New Delhi, Jan.13 (ANI): The Confederation of Indian Industry (CII) has sought Prime Minister Dr. Manmohan Singh ‘’s intervention to sort out the issue of losses suffered by exporters who were sold exotic and complex derivative products by banks.
The CII has suggested that a committee under the chairmanship of the PM Dr. Singh be set up to ensure resolution of the issue between the banks and exporters.
Several exporters, who hedged their currency risk by executing forex derivatives contracts with banks, suffered huge losses on fluctuation in the value of rupee and now want that the banks compensate them.
Many of the exporters entered contracts with the banks without understanding the working of the complex financial products and suffered losses.
“Many Indian exporters have lost substantially in derivative products offered by financial institutions. The loss by small and medium enterprises itself is over 2,000 crore,” said Sanjay Budhia, the Chairman of the CII National Committee on Trade.
The domestic currency had depreciated by over 20 per cent in 2008 after appreciating by over 10 per cent in 2007
Many exporters entered into derivative deals with banks in early 2008 after the rupee strengthened to Rs.39, on apprehensions that it would strengthen further. These contracts allowed them to sell dollars between Rs.39 and 40.
With the rupee weakening to 50 against the dollar later, many exporters booked huge losses. However, these days most of the forex advisors are advising their clients to wait for the rupee to fall further before getting into forex deals.
The commerce Ministry has called a meeting of different commodity specific export promotion councils and Federation of Indian Export Organisations to see the impact of the stimulus packages announced earlier by the government in December and January this year.
“It looks very difficult to achieve,” said Budhia on being asked about exports target of 200 billion dollar for the fiscal.
CII suggestions also include increase in tax refund rates by about five per cent, removal of seven per cent interest rate ceiling on export credit and two per cent interest subsidy. (ANI)
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