‘Extend interest subsidy scheme for exporters’

Amiti Sen New Delhi | Updated on April 12, 2021

India’s goods exports in April-March 2020-21 were valued at an estimated $289.92 billion   -  istock/tcly

Commerce Ministry tells RBI to continue all the benefits under the scheme

To help Indian exporters struggling to conduct their business in the uncertain global market, the Commerce Ministry is trying to ensure that the interest equalisation scheme, which lapsed on March 31, is extended by the Reserve Bank of India (RBI) without curtailments.

“The Commerce Ministry is in touch with the RBI on the extension of the interest equalisation scheme for exporters. It is being hoped that the scheme will be extended to all beneficiary sectors without modifications soon,” a source tracking the matter told BusinessLine.

The background

The interest equalisation scheme, introduced on April 1, 2015, extends a subsidy on interest provided on pre- and post-shipment export credit ranging between 3 per cent and 5 per cent to exporters. The banks provide credit at the lower interest rate to exporters and the differential amount is later reimbursed by the government. In addition to MSME exporters of all items, exporters of 416 identified products are eligible for the benefit.

“Exporters are hopeful that the benefits under the interest equalisation scheme will remain intact in the new fiscal and there will be no curtailment in the list of eligible items or a tinkering of rates,” the source said.

Since the budgetary allocation for 2021-22 set aside by the Finance Ministry for the scheme at ₹1,900 crore is more than the revised estimates for last year, there is a general optimism that there will be no rude surprises in store for exporters.

“Although, there are indications that there will be continuity in the scheme, one can never be certain till it is notified by the RBI,” the source added. Last year, following the one year extension of the old five-year Foreign Trade Policy till March 31, 2021, the RBI also issued a notification for a one-year extension of the interest equalisation scheme.

Scheme to be extended?

Now that the government has given a second extension to the old FTP, this time by six months (till September 30, 2021), there are speculations about the period of extension of the scheme.

“There is uncertainty whether the government wants the interest equalisation scheme to be part of the next five year FTP. As some experts feel the scheme has the potential of getting identified as an export subsidy at the WTO and, therefore, create possible conflict in the future, it may be better to extend it on a piece-meal basis,” the official said.

India’s goods exports in April-March 2020-21 were valued at an estimated $289.92 billion, which was 7.4 per cent lower than exports worth $313.36 billion in April-March 2019-20. In March 2021, however, exports shot up by 58.23 per cent to $34 billion, propelled by sectors such as engineering goods, gems & jewellery and pharmaceuticals.

Published on April 12, 2021

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