In a likely boost to e-commerce exports, the central government and the Reserve Bank of India (RBI) are considering giving such exporters more time, between 12 to 15 months, for foreign exchange (FX) payment realisation, a senior government official told Moneycontrol.
This will essentially relax the period to repatriate the full value of exporters’ shipments by converting it into their home currency, the official said.
"The commerce ministry's Directorate General of Foreign Trade (DGFT) has discussed this with the RBI. E-commerce players have requested for a longer timeline of up to three years but the Centre has asked for the upper limit to be increased to 15 months at the most," the official told Moneycontrol.
The RBI is yet to take a final call on this matter.
Currently, entities get 270 days, or nine months, to realise export payments for the majority of goods and services.
The proposal to ease FX realisation policy for e-commerce entities is part of a larger effort by the government to boost exports via this channel given the increasing rise in purchases through the online mode.
The RBI framework
FX payment realisation is a crucial step for exporters as it directly impacts their cash flows and profitability. The RBI has a framework to monitor and facilitate this process.
The official said that a different ecosystem is required for e-commerce players because often goods sold by them remain in the warehouses for a long time before they are picked up.
"If it gets purchased after 12 months then the payment realisation cannot be done within nine months as per the current stipulated timeline by the RBI. This is why such players require more flexibility," the official added.
Easing the RBI's FEMA guidelines in this regard would benefit e-commerce players which, in addition to selling directly to consumers, also export goods, store them in warehouses abroad, and sell them after a year or more.
CAD hurdle
The RBI has been strict about its FX realisation policy given that India has been traditionally running a current account deficit, the official said, adding that the government believes that the situation needs to evolve as and when the country moves to a more comfortable situation with regard to foreign exchange reserves.
India’s current account deficit moderated to 0.7 percent of the GDP in FY24, compared with 2 percent in the previous years, on account of higher services trade and greater net portfolio inflows.
Boosting exports
The commerce ministry along with the Department of Revenue is also working on establishing dedicated e-commerce hubs across the nation in a bid to streamline the process for online export shipments and ensure faster clearance of goods.
As a part of this initiative, the government is in talks with various e-commerce firms like Flipkart, Shiprocket and DHL Express among others to help micro, small and medium enterprise (MSME) producers to export from India to help achieve the goal of $1 trillion goods exports by the year 2030.
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