Budget 2022 Wishlist: Exporters seek tax incentives, higher budget for Agri exports and more

New Delhi: With just a few days left for the Union Budget to be presented, the Federation of Indian Export Organisations (FIEO) has suggested the finance ministry draws a roadmap for addressing pressing issues of exporters, including shortage of containers, abnormal increase in freight and space constraints on ships. 

FIEO President A Sakthivel said that Indian exports are on the upswing, and "we are within the range of reaching the milestone of USD 400 billion during the current fiscal year."

Here's a look at some key suggestions provided by the FIEO to Finance Minister Nirmala Sitharaman, who will present the Budget 2022 on February 1.

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Logistics Issues:
 
Considering our mid-term target of USD one trillion by 2027-28 for merchandise exports, container manufacturing should be encouraged more so as we are also pushing coastal shipping in our country. 

A scheme similar to Production Linked Incentive (PLI) for container manufacturing can come in handy to encourage domestic manufacturing of containers addressing some cost disadvantages.
 
Since international trade is emerging as an important component of the Indian economy, we should develop an Indian shipping line of global repute. This year, we may be remitting over USD 75 billion or more as freight charges. 

An Indian shipping line, which gets 25 per cent of this business, can save USD 17-20 billion on a recurring basis annually. This figure will increase as we move towards trillion-dollar merchandise exports. 
 
Marketing issues: 
 
Our MSMEs lack exposure despite having the best of products. Many countries encourage overseas marketing through fiscal or tax incentives. 

We should consider providing a double tax deduction for overseas marketing. For example, for every USD 1000 spent on global marketing, USD 2000 may be provided as tax deductions under the income tax for specified kinds of overseas marketing for market exploration, market penetration and market promotion, etc. 

A ceiling of USD 5,00,000 may be put under the Scheme so that the investment and tax deduction are limited.

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Credit issues: 
 
The Emergency Credit Linked Guarantee Scheme (ECLGS) has provided huge support to businesses, particularly to MSMEs during the Covid-19 pandemic. 

The Scheme should be extended for one more year for seamless flow of credit to the business, particularly as the demand for credit has gone up with the increase in prices of inputs, transportation costs, including overseas freight and logistics disruptions. 

On the contrary, the collateral value has deteriorated during Covid-19, and thus ECLGS will provide the necessary oxygen to the industry.

Interest Equalisation Scheme has helped exporters get the credit close to the international benchmark. The Scheme requires an extension with effect from October 1, 2021, at least for three years so that exporters can take long-term positions based on the competitive interest rates under the IES. 
 
R&D Support: 
 
R&D and product development is key to sustained exports. Looking into the low R&D spending as a percentage of GDP in India, we need to encourage such spending through liberal tax support as R&D has a high gestation period with a lot of uncertainties. 

200-300 per cent tax deductions may be provided on investment in R&D and product development for a long-term exports strategy to increase value addition and diversify the exports base. 
 
Agri Exports Support: 

Our Agri exports have done exceedingly well both in 2020-21 and in 2021-22, but the share of the processed sector is still low in our Agri exports. 

We need to provide a higher budget for Agri exports, the Transport and Marketing Assistance (TMA) Scheme and backward and forward linkages in the Agri sector.

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