Exporters of readymade garments from India have sought a two-year extension of the interest equalisation scheme that expired last month and enhancement of the rate of subsidy on the interest rate to 5 per cent from the existing 3 per cent.

“Given the extremely volatile and uncertain cash flow situation of the apparel exporters, we request you to kindly announce continuity of the interest subvention (equalisation) scheme which expired on March 31 2020,” said A Sakthivel, Chairman, Apparel Export Promotion Council (AEPC) in a letter to Commerce & Industry Minister Piyush Goyal on Wednesday.

As per estimates made by the AEPC, the disruptions in orders and payments brought about by the spread of the COVID-19 pandemic globally could lead to a loss of $ 4 billion for garment exports.

The interest equalisation scheme announced for five years in 2015, offered a 3 per cent subsidy on pre and post-shipment export credit to exporters of 416 items and the MSME sector. The subsidy rate was enhanced to 5 per cent for the MSME sector in 2018.

AEPC sought early action on the extension of the scheme as in the absence of any announcement on the matter, banks had started debiting the accounts of the exporters.

At a time when garment exporters are struggling to stay afloat in a shrinking global market, uncertainty surrounding the fate of the popular scheme was adding to their woes, Sakthivel said.

The Commerce & Industry Ministry is in talks with the Finance Ministry and the Prime Minister’s Office on expediting a decision on extending the interest equalisation scheme for some more. The request made by several export associations for enhancing the subsidy rates is also under considering, as per official sources.

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