Exporters struggling to stay afloat in a global market hit by slowdown have been extended the long-awaited interest subvention (subsidy) scheme that would allow those in labour-intensive and small scale sectors to avail themselves of loans from banks at a three per cent lower rate.

The scheme, now re-named interest equalisation scheme, was approved by the Cabinet Committee on Economic Affairs (CCEA) on Wednesday. It will be implemented with retrospective effect from April 1, 2015 and will cost the exchequer an estimated ₹2,500 crore-₹2,700 crore, annually.

“This will give a boost to exports of sectors like handicrafts, agriculture products, food processing ventures and also the small and medium enterprises that were not able to access foreign loans and were dependent on high cost domestic loans,” Piyush Goyal, Union Minister of State (Independent Charge) for Coal, Power and Renewable Energy, said at a media briefing after the Cabinet meeting.

The scheme would be available to all exports of micro small and medium enterprises (MSME) and 416 other items spread across 25 sectors. The sectors covered are mostly labour intensive and include agriculture/food items, auto-components, bicycle parts, handicrafts, electrical engineering items and machinery, telecom equipment, handmade carpet (including silk), handloom products, coir items, jute, readymade garments and made ups, toys, sports goods, paper and stationary, leather goods and ceramics. The scheme, however, will not be available for merchant exporters.

Regaining competitiveness According to exporters’ body FIEO, the re-introduction of the scheme will help exporters to get credit at a competitive rate to regain their competitiveness which has also been eroded due to steep depreciation of currencies. India’s goods exports have witnessed a continuous decline for the past 11 months due to a slow-down in global demand and fall in commodity prices including petroleum.

Providing much-needed certainty to exporters, the government has decided to make the scheme available for three years after which the Commerce Ministry will study its impact on exports and its further continuation.

“While the financial implication of the proposed scheme is estimated to be in the range of ₹2,500 crore to ₹2,700 crore annually, the actual financial implication would depend on the level of exports and the claims filed by the exporters with the banks,” an official release said. Funds to the tune of ₹1,625 crore under non-Plan head of account are available, which would be provided to the RBI during 2015-16, it added.

While the details of the schemes will be notified separately by the RBI, banks would be required to give loans to exporters from identified sectors at three per cent lower rates than what they otherwise charge and be compensated by the government.

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