Interest Equalisation Scheme: Govt Approves Rs 2,500 Crore To Continue Subsidy Scheme Till June 2024

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved an additional allocation of Rs 2,500 crore for the continuation of interest equalisation or subsidy scheme on pre- and post-shipment rupee export credit up to June 30 next year.

This would help exporters from identified sectors and all MSME manufacturer exporters to avail rupee export credit at competitive rates at a time when the global economy is facing headwinds.

Exporters get subsidies under the ‘Interest Equalisation Scheme for pre and post-shipment rupee export credit.

The decision in this regard was taken by the Union Cabinet chaired by Prime Minister Narendra Modi on Friday.

It “has approved an additional allocation of Rs 2,500 crore for continuation of Interest Equalisation Scheme till 30th June 2024,” an official statement said on Friday.

The additional outlay of Rs 2,500 crore, over and above the current outlay of Rs 9,538 crore under the Scheme, is made available to bridge the funding gap to continue the Scheme up to June 2024.

Manufacturer and merchant exporters exporting specified 410 products will get a 2 per cent subsidy and all the MSME exporters will get 3 per cent.

The scheme was started on April 1, 2015, and was initially valid for five years up to March 31, 2020. It has been continued thereafter, including a one-year extension during COVID, and with further extensions and fund allocations.

Currently, the scheme provides an interest equalisation benefit at the rate of 2 per cent on pre and post shipment Rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines at 4 digit level and 3 per cent to all MSME manufacturer exporters.

These sectors include handicrafts, leather, certain fabrics, carpet and readymade garments.

It was not fund limited and extended the benefit without any limit to all exporters. The Scheme has now been made fund limited, and benefit to individual exporters has been capped at Rs 10 crore per annum per IEC (Import Export Code).

In addition, the banks that lend to exporters at an average rate of more than Repo +4 per cent would be debarred under the scheme.

The scheme will be implemented by RBI through various public and non-public sector banks that provide pre and post shipment credit to the exporters. It is jointly monitored by DGFT (Directorate General of Foreign Trade) and RBI through a consultative mechanism.

So far this fiscal till November 30, the government has disbursed Rs 2,641.28 crore as against the allocated budget of Rs 2,932 under the scheme. Rs 3,118 crore was disbursed in 2022-23 and Rs 3,488 crore in 2021-22.

Commenting on the decision, exporters said it would help them in the current turbulent times.

“This is a good move to boost exports and to increase the liquidity to the exporting community specially for the MSME execrator. It comes as a great relief in these challenging times,” former FIEO vice president Khalid Khan said.

Federation of Indian Export Organisation (FIEO) Director General Ajay Sahai said that the government should look into enhancing the subvention to 5 per cent and 3 per cent as interest rates have reached the pre-Covid levels.

Cumulatively, exports during the April-October period this fiscal contracted by 7 per cent to USD 244.89 billion, while imports fell 8.95 per cent to USD 391.96 billion.

The trade deficit during the seven-month period was USD 147.07 billion against USD 167.14 billion in the corresponding period last year.

(With PTI Inputs)