Interest equalisation scheme for exporters extended for 2 months; FIEO disappointed

The scheme helps exporters from identified sectors and all MSME manufacturer exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds. (Representative Image)

The government on Friday extended the interest equalisation scheme on pre- and post-shipment rupee export credit for two months to promote the country's outbound shipments.

The scheme which provides exporters interest benefits was ending on June 30 this year.

However, apex exporters' body Federation of Indian Export Organisations (FIEO) expressed disappointment over the move as the extension was applicable only for MSME exporters.

In a notice, the Directorate General of Foreign Trade (DGFT) said: "Trade and industry is hereby informed that the Interest Equalization Scheme for Pre and Post Shipment Rupee Export Credit, which had earlier been extended up to June 30 as a fund limited scheme, has been further extended for two months i.e., up to August 31." It said, however, this extension is applicable only for MSME exporters, and for such extended period, the total outlay of the scheme is capped at Rs 750 crore.

It added that claims of non-MSME exporters will not to be entertained beyond June 30.

On December 8, 2023, the Union Cabinet approved an additional allocation of Rs 2,500 crore for the continuation of the scheme up to June 30.

The scheme helps exporters from identified sectors and all MSME manufacturer exporters to avail of 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 additional outlay of Rs 2,500 crore, over and above the current outlay of Rs 9,538 crore under the scheme, was made available to bridge the funding gap to continue the plan up to June 2024.

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-19, and with further extensions and fund allocations.

Commenting on the development, Ashwani Kumar, President, FIEO, said that this is quite disappointing for those exporters who are exporting products under 410 tariff lines (or product categories), if they are not manufacturer MSME.

"This may affect exports of labour intensive exports , which has lost market share in past few years, as many merchant exporters are playing pivotal role in exporting such products and exports of such products from some large companies may also be impacted," Kumar said.

The scheme is fund-limited, and benefits to individual exporters are capped at Rs 10 crore per annum per IEC (Import Export Code).

The country's exports in May rose by over 9 per cent to USD 38.13 billion.