Govt announces interest equalisation scheme to boost exports

Govt announces 3% interest subsidy to boost exports

In a bid to arrest the decline in exports , the Central government has announced an interest equalisation scheme on pre and post shipment rupee export credit with effect from 1st April, 2015 for five years.

The rate of interest equalisation would be 3 per cent. The scheme would be available to all exports made by small and medium scale enterprises across 416 tariff lines. Merchant exporters will not be eligible for the sop.

The scheme covers mostly labour intensive and employment generating sectors like processed agriculture/food items, handicrafts, handmade carpet (including silk), handloom products, coir and coir manufactures, jute raw and yarn, readymade garments etc. Fabrics of all types, toys, sports goods, paper and stationary, cosmetics and toiletries, leather goods and footwear, ceramics and allied products, glass and glassware are also included. Medical and scientific instruments, optical frames, lenses, sunglasses, auto components industrial machinery, electrical and engineering items, manufactured by SMEs are also covered.

According to an official press release, the scheme is expected to cost the government at least Rs 2,500 crore annually. The actual financial outgo, though, would depend on the level of exports and the claims filed by the exporters with the banks.

Funds to the tune of Rs 1,625 crore would be made available to RBI during 2015/16, the commerce ministry states.

Terming it as a long-awaited announcement, S.C. Ralhan, President, Federation of Indian Exporters Organisation (FIEO), said the scheme would provide stability and help exporters factor the same in their pricing to become more competitive. “Credit cost has become all the more important as the cycle of exports has elongated due to global contraction in demand and liquidity forcing the exporters to borrow for longer periods,” he said.

The scheme will be evaluated after three years.

While it will be funded from the funds available with Department of Commerce under non-plan head during 2015/16, the restructured scheme would be funded from plan side from 2016/17 onwards.