Centre looking at resuming interest subsidy for exporters in next fiscal

To ensure cheaper funds for exporters and increase their global competitiveness, the Centre is looking at resuming the interest subvention scheme for select sectors such as handicrafts, carpets, readymade garments, processed agricultural products, sports goods and toys, and sub-sectors of engineering goods.

The Commerce Ministry has asked the Finance Ministry to provide interest subsidy to at least some labour-intensive sectors in the new fiscal as its discontinuation this year had hurt exporters, especially those in the small and medium segment.

“The Finance Ministry has told us that it will not be possible to give interest subvention for the on-going fiscal because of financial constraints. So, we have sought that the scheme should be resumed in the new fiscal,” a Commerce Ministry official told BusinessLine .

The interest subvention scheme, under which banks provided an interest subsidy of 3 per cent to exporters from specific sectors on loans extended to them (banks were later reimbursed by the Centre), lapsed on March 31, 2014.

The Centre’s decision not to announce new sops under the Foreign Trade Policy in the on-going fiscal resulted in non-extension of the subvention scheme despite continuous requests from the exporting community.

According to exporters body Federation of Indian Export Organisations (FIEO), competitors were paying an interest rate of about 6-7 per cent, while Indian exporters had to pay about 12 per cent, which was hitting their competitiveness.

India’s exports declined 3.77 per cent in December 2014 to $25.39 billion signalling that global demand, especially from the West, continued to be uncertain. Exports in the first three quarters posted a low growth of 4 per cent to $241.15 billion.

In its recommendations for Budget 2015-16, FIEO has suggested that the interest subvention scheme should cover all sectors and continue for at least the next three years.

Till last year, the benefits of the interest subvention scheme were available to sectors such as handicrafts, handlooms, carpets, readymade garments, processed agricultural products, sports goods and toys, sub-sectors of engineering goods and items exported by the small and medium sector. The Commerce & Industry Ministry spent ₹1,475 crore on interest subvention in 2013-14, which was more than a fourth of its total revised expenditure of ₹5,395 crore.

While the decision on the interest subvention scheme will be taken by the Finance Ministry while finalising the Budget for next fiscal, an announcement, if a positive decision is taken, is likely to be made in the Foreign Trade Policy which is usually presented shortly after the Budget.

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