Higher incidence of cess, transaction cost impact exports - ASSOCHAM

21 Feb '07

3 min read

Half a dozen key economic activities in areas of engineering goods, metal, ores, textile, leather and pharma are the worst victim of severely higher transaction costs, inadequate infrastructure & levies and cess, imposed by government that are adversely impacting India's export competitiveness, according to findings of The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

In a Study on `Export Turnover, Product Exposure, Territorial Exposure & Capacity to Domestic Sourcing of Inputs' undertaken by ASSOCHAM has revealed that the aggregate adverse impact of fiscals, poor infrastructure and cumbersome procedures on exports was to the extent of 14% of total value of exports.

The Study notes that transaction cost is much more on exporters that imports higher volumes of inputs which leads to higher manufacturing cost. Therefore, the government should check the procedure of transaction costs in trade, imports and exports points out the Study.

Cess and levies also impact exports perhaps the most with incidence of around 5.22% of freight on board (FOB) value. Problems in exports, impact exports to the extent of 4% of the FOB value.

Commenting on findings of Study, ASSOCHAM President, Mr. Venugopal N. Dhoot said that metals and ores sector are most burdened by many number of cess, levies, poor infrastructure and export procedures.

The Survey highlights that small exporters seemed to constitute the largest percentage share out of the three categories of exporters. Leather sector has the biggest number of small-scale exporters, i.e. 88.22%, followed by agro (86.23%), gems & jewellery (83.50%), textiles (77.58%), project goods (64.72%).

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