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The government’s decision to extend the interest equalisation scheme for exporters, allowing credit at a subsidised rate up to March 31, 2024, with retrospective effect from October 1, 2021, will provide greater predictability in operations and help in judicious pricing decisions, exporters have said.
“The decision will provide a level-playing field in the global markets, especially to MSME units. It also ensures certainty and predictability to exporters who have been facing various challenges such as high freight rates and a surge in input costs. The latest Russia-Ukraine crisis has created uncertainty in the minds of the export community as it threatens to disrupt the ongoing recovery,” said Mahesh Desai, Chairman, EEPC India.
The RBI issued a notification on Tuesday extending the interest equalisation scheme for exporters, for pre and post shipment credit, till March 2024. For MSME manufacturer exporters, a 3 per cent interest subsidy is to be provided, while for non-MSME manufacturer exporters and merchant exporters of identified categories, subsidy is set at 2 per cent.
The implementation of the scheme requires banks to provide credit at the subsidised interest rates to exporters and then claim the differential amount from the government.
Piecemeal extensions
The scheme, which was introduced in the Foreign Trade policy 2015-2020 for five years, had so far been extended on a piecemeal basis. It was last extended in July 2021 till September 2021. The latest decision to extend it from October 2021 till March 2024 is in response to exporters’ demand for a long-term extension to bring in more certainty and predictability to operations.
“The continuity of the interest equalisation scheme till March 31, 2024, has provided stability, which will help exporters at a time when export orders are flowing to India,” said A Sakthivel, President, FIEO.
The scheme will enable exporters to take a look at their long-term position. Since the interests are looking to firm up, the help extended by the scheme is most timely, he added.
“The extension given up to March 2024, as requested by the association in all its representations, will be helpful to knitwear exporters to work out their costing accordingly while taking up the orders,” said Raja M Shanmugha, President, Tirupur Exporters’ Association.
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