In a bid to bolster exports from the state, the Uttar Pradesh government has proposed to triple the freight subsidy by upto Rs 40,000 per container from Rs 12,000 now.
The move is aimed at providing level-playing field to manufacturers in the state who are considered to be at disadvantageous position compared to those operating from a coastal state or closer to ports. It is also expected to help the state increase its total exports in value terms to Rs 3 lakh crore in the next three years.
"We have proposed to increase freight subsidy under the new export policy. We are providing it already to make products competitive. We are land-locked state. We have proposed to increase the subsidy level from a maximum of Rs 12,000 per container which would be increased to Rs 40,000 per container," Navneet Sehgal, Additional Chief Secretary (MSME and Export Promotion) told BusinessToday.In.
Increase in freight subsidy has been a key demand of state industry representatives as high transportation cost eats away their margins leaving them uncompetitive as against peers from coastal states like Gujarat, Maharashtra and Tamil Nadu. Apart from higher freight charges, moving goods from inland container depots (ICDs) to ports takes longer time adding to the overall cost.
"Transporting a container from Kanpur ICD to Neva Shiva port (Mumbai) costs nearly Rs 80,000. This adds almost 2% to the cost of the goods," said VK Aggarwal, Managing Director of Shashi Cables, a Lucknow-based medium enterprise.
Neeraj Kedia, Chairman of Chakradhar Chemicals suggested to do away with the requirement of booking consignment through ICD for availing freight subsidy.
"Booking shipments from ICD increases our cost as we have to first bring empty container, stuff it in our factory and then send back to the ICD. Besides, there are several charges at the ICD," Kedia argued.
UP is one of the key exporters of leather goods, textiles, electronic goods and handicraft. The state government has launched several schemes to promote these sectors. One of the key initiatives has been 'one-district-one-product' to promote about 25 select items. The state has an annual budget of Rs 250 crore to promote local items.
"The scheme has picked up a lot. In the last two years, exports have risen by 38%. Of these, the 25 products account for nearly 80%," top bureaucrat Sehgal said.
He elaborated on the scheme saying the government had started setting up common facility for various products. For instance, in Badaun district of the state, a unit has been set up to polish rough buttons. Similarly, an international-standard lab has been established in Agra to test leather goods such as shoes and sandals before shipping them to Europe and the US.
The UP Additional Chief Secretary Sehgal noted that state government had signed MoUs with e-commerce giants for onboarding of small firms on their online platform.
"We have facilitated onboarding of various enterprises. We have our own e-market place also. About 150 firms have already joined. We have signed MoUs with Amazon, Flipkart, eBay. We had received proposal from Alibaba also but it is currently pending," the senior IAS officer said.
In the current financial year, banks and financial institutions have extended loans to 10.80 lakh units in UP. Out of this, 4.37 enterprises received Rs 10,800 crore under Emergency Credit Line Guarantee Scheme (ECLGS).
"About 6.32 lakh units have been sanctioned and disbursed 18,000 crore. Many of these are in rural and semi-urban areas. We will organise loan mela also shortly. About 25 lakh new jobs have been created by the MSMEs in the last 8 months," Sehgal said.
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