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Commerce, FinMin in funding brawl
December, 23rd 2006

A PRE-BUDGET tussle between the finance and commerce & industry ministries has broken out with the latter demanding that its budgetary allocation for 2007-08 be increased in tandem with increasing exports. The commerce department claims that Rs 800 crore worth of payments to exporters - including central sales tax refunds to EOUs and excise refund to deemed exporters - could not be made in the current fiscal due to fund shortage.

The commerce & industry ministry is planning to ask the finance ministry to take on the responsibility of making all payments to exporters if adequate resources are not allocated in Budget 2007.

The commerce department officials said that while the finance ministry makes its share of payments to exporters like duty drawback on time, the commerce ministry has to make exporters wait as they are constrained by inadequate resources. We get a bad name for no fault of ours, an official said.

In 2006-07, budgetary allocation for the commerce department was increased to Rs 1,925 crore from Rs 1,902 crore in 2005-06 resulting in an increase of less than 2%. You cannot have a jump in exports without a corresponding increase in funds for meeting their refund claims, the official added.

Sources pointed out that in case the finance ministry is not ready to increase allocations adequately, the commerce department would ask it to take on the responsibility of paying all refunds to exporters. Our department will very happily handover the responsibility to the finance ministry, the source said.

Meanwhile, exporters - in their pre-budget memorandum to the finance minister - have demanded that they should be granted CST exemption, just like EOUs. According to FIEO president Mr OP Garg, the CST element comes to 2.8% of export value (assuming inputs cost 70%) which makes Indian exports less competitive. All exporters should be exempted from paying CST, he said.

The commerce ministry has not yet sent its formal budget proposal to the finance ministry. Officials are still working on the outlay they should ask for in the next fiscal.

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