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Industry urges RBI to issue instructions to banks to realize export proceeds in Indian rupees from Sri Lanka Bank
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Laxmi Yadav, Mumbai
June 17 , 2022
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The drug industry has urged the Reserve Bank of India (RBI) to issue notification directing Indian banks to issue an agreement to exporters for realizing export proceeds in Indian rupees from Sri Lanka Bank as part of one billion US Dollar Line of Credit.
India has announced one billion US Dollar Line of Credit in Indian rupees to Sri Lanka through the State Bank of India for purchasing essential goods from India. Medicines fall under this category. Accordingly, many companies are trying to utilize this Line of Credit for exporting medicines to Sri Lanka.
“Drug importers in Sri Lanka have also confirmed that for pending orders, whether tenders or primary, they would procure goods through Indian Credit Line Facility. There are certain formalities outlined by Sri Lankan authorities under this Line of Credit in Indian rupees and for the same they have requested Indian exporters to send copies of duly filled documents, formats. One such document is an agreement for receiving payment in Indian rupees from Sri Lanka bank by exporter’s bank and by exporter entity. However, our bankers like Kotak Bank, HDFC Bank, ICICI Bank and even State Bank of India are saying that they do not have any circular or any direction from Reserve Bank of India or Commerce Ministry or any other government department on the subject and as such they cannot issue the above-mentioned agreement,” stated Indian Drug Manufacturers Association (IDMA) in a representation to Vivek Srivatsava, chief general manager, Reserve Bank of India.
“Pharma products have defined shelf life and the goods are waiting to be dispatched. Once the stock crosses a certain shelf life, it would be difficult to sell those stocks with short expiry. Even the stocks manufactured for export purposes would not be possible to sell in the domestic market. The stocks are lying on port and industry is suffering demurrage, interest cost on working capital. Insurance companies are not giving credit risk coverage. Banks are not confirming USD Letter of Credits. Even the said situation is affecting the stock position in Sri Lanka as it is dwindling fast. There is no process of reinstating the essential medicine availability in Sri Lanka. Patients at large are suffering due to shortage of medicines in hospitals/markets of Sri Lanka. In this situation, the gesture of the Indian government to help our neighbour is not getting fulfilled and the whole purpose of creating a Line of Credit is getting defeated,” stated the industry body.
It appealed to the apex bank of the country to intervene in the matter in advising/issuing the circular/guidelines to the commercial banks so that exporters can ship the pending orders without any ambiguity.
Sri Lanka is currently facing its worst economic crisis since independence from Britain in 1948. The economic crisis has led to an acute shortage of essential items like food, medicine, cooking gas etc. The Sri Lankan government has recently come out with several measures, including imposing a 2.5 per cent social contribution tax on companies based on their turnover and declaring Fridays as holidays for most public sector employees, to facilitate the economic recovery and reduce energy and food crisis.
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