Mumbai: The union budget for 2008-09 has slashed allocation for export promotion and overseas market development programmes by Rs600 crore at a time when the country's exporters are fighting a global slump and an a higher rupee cost.

The budget, while announcing a Rs300 crore reduction in export subsidy, also abolished an interest subsidy under the programme 'assistance for export promotion and market development'.

While export subsidy has been reduced to Rs1,294 crore under the revised estimates of Rs 1,594 crore for 2007-08, no provision has been made for interest subsidy to banks in the next fiscal.

Overall budget allocation for the commerce ministry stands reduced from Rs3,771 crore (actuals) to Rs3,520 crore.

Finance minister P Chidambaram in budget 2008-09 had argued that the interest cost of sterilisation through market stabilisation bonds, estimated at Rs8,351 crore for the whole year, was "in a sense subsidy to the export sector".

Exporters have rejected the idea and expressed dissatisfaction with the budget proposals.