Government cuts import duties, bank lending rates for exporters

Mumbai: The government will lower import duties on some textile fibres and reduce interest burden on loans to help exporters hit by the rising the rupee, finance minister P Chidambaram told parliament.

Customs duty on polyester fibres and intermediates would be reduced to 5 per cent from the present 7.5 per cent, and that on man-made fibres to 5 per cent from 10 per cent, he said, adding, there will be no change in the customs duty for nylon chips, nylon yarn, rayon grade wood pulp and acrylonitrile.

The government also proposed to provide an additional interest subsidy of 200 basis points on loans taken by exporters of leather, handicrafts, marine products and some textiles.

The government is already offering a subsidy to banks for a 200 basis point reduction in lending rates for firms exporting textiles, ready-made garments, leather products, engineering goods, sports gear and processed foods.

Exporters are now borrowing at 450 basis points below the benchmark prime lending rate, which ranges from 12-14 per cent depending on the bank.

Chidambaram said the government would also exempt storage and warehousing services, specialised cleaning services (fumigation and disinfection) and business exhibition from service tax.

The rupee had surged over 15 per cent in value against the dollar since October 2006.

The government had in July announced a $320 million in relief package for exporters, including tax breaks and reduction in bank lending rates for the worst-affected sectors.