The new minister for commerce and industry, Suresh Prabhu, takes over at a time when exporters feel let down by his ministry.
Their working capital requirement and cost on capital goods have gone up, after the decision to impose Goods and Services Tax (GST) on their local procurement and import. Their export realisations have gone down, due to a stronger rupee. Global trade shows signs of picking up but competition has intensified. Prabhu has started well, with a statement that he’d give priority to the problems of exporters and job creation. The agenda before him is formidable, as noted in this publication’s editorial last Tuesday. Without repeating the same issues here, let me flag others that need attention.
At the operating level, exporters face serious problems with the computer servers of the Directorate General of Foreign Trade (DGFT), Customs (known as ICEGATE or ICES) and the GST Network. For three to four months, the DGFT server has been very slow and also works only intermittently. So, a lot of time is taken in filing of applications and many spend their time, even in the night hours, looking for a window when the server is fast enough to take their applications. Even after these are filed, it takes days before issue of authorisation; thereafter, their transmission to the Customs server takes more days. Applications after the due date are sometimes rejected instead of accepting these with a cut in entitlements for late filing. All this results in enormous wastage of manhours, beside delay in clearance of imported goods causing demurrage at the ports and stock-out situations at factories. These entail enormous costs.
The Customs server is also too slow and works intermittently. So, there are delays in filing of shipping bills and bills of entry. So, exporters miss their shipments and importers suffer heavy demurrage due to delay in clearance of their goods. Customs acknowledge the problem and have allowed waiver of penalties for late filing of bill of entry but this is discretionary. So, there are complaints of arbitrariness in granting penalty waivers.
As for the GST Network, it is simply not ready to take the returns, as is evident from repeated postponement of deadlines and waiver of penalties for late filing. The result is enormous wastage of time and delay in refunds for exporters. These problems impose unnecessary costs that make exporters uncompetitive and, so, have to be attended to immediately. As a chartered accountant from Mumbai, the new minister understands how businesses work. He is known for a visionary and long term approach.
However, he should not hesitate to push his subordinates and cabinet colleagues to address the problems that exporters face. He should not rely only on the useful inputs he might get from his bureaucrats, corporate leaders and heads of export promotion councils. He should meet smaller exporters at open house meets, not only in the metros but in the smaller centres. That is when he will get to know their problems and whether his team and other agencies tasked with export support are working well enough. Exporters look to him to understand their difficulties and resolve these quickly, and to craft a meaningful mid-term review of the Foreign Trade Policy and Procedures, formally due this month-end.