The Russian rouble’s rollercoaster ride this past week has put Indian exporters on notice, with many looking to minimise the currency risks faced by them. Exporters are now knocking at the Commerce Ministry’s doors to put in place a rupee payment mechanism for trade with Russia.

This rupee payment mechanism should be on the lines of the one devised for Iran in the wake of US and European Union sanctions.

Currently, India’s merchandise exports to Russia are invoiced in US dollars. Crippled by sanctions and the sharp fall in oil prices, the Russian rouble has lost half its value against the dollar since June.

“We want the Government to come out with a payment mechanism that is similar to that of the one with Iran,” Ajai Sahai, Director-General and CEO, Federation of Indian Exporters Organisation (FIEO), told BusinessLine. FIEO will soon approach the Commerce Ministry with this demand, Sahai said.

Under a rupee payment model, all trade settlements can be done in rupees. Banks in the two countries would accumulate their claims against each other under a centrally organised arrangement and settle the same at pre-determined periodicity, in rupees.

With the balance of trade in favour of Russia, it is felt that exporters/importers or banks from Russia be allowed to open and maintain non-interest bearing rupee accounts with banks in India. The balances could be used only for trade settlements between India and Russia, suggest some Indian exporters.

Indo-Russian trade stood at $6.01 billion in 2013-14, with the trade balance in favour of Russia. India’s exports to Russia in 2013-14 stood at $2.121 billion, down 7.6 per cent from the previous year. Major Indian exports were pharma products at $535 million followed by electric machinery and equipment $170 million), iron and steel ($128 million), and coffee, tea and spices ($117 million). Indian imports from Russia stood at $3.89 billion in 2013-14, down eight per cent from the previous year.

The collapse of the rouble against the dollar in recent weeks is seen hurting Indian exporters, especially of agri products. Already, the exporters of products such as gherkins and grapes are facing the heat while others such as instant coffee are keenly watching the developments in Russia.

The rouble, which has been sliding against the dollar since August, plunged in the past few weeks. Some extreme measures such as increase in interest rates by the Russian Central Bank have helped stabilise the rouble, but far below its previous level.

Source:thehindubusinessline.com