Economy

Govt looking at 3-5 years extension for interest relief scheme for exporters

Amiti Sen New Delhi | Updated on August 09, 2021

Long-term extension may be part of five-year FTP scheduled in October

The Centre is examining the option of extending the interest equalisation scheme for exporters by three-five years, instead of doing so on a piece-meal basis of a few months at a time, to provide stability to exporters and help them in judicious pricing of their products.

“As part of the new Foreign Trade Policy expected to be implemented in October this year, the Commerce Ministry may extend the interest subsidy scheme for a longer time-frame of three-five years,” the official said.

The interest equalisation scheme, introduced on April 1, 2015 for five years as part of the FTP 2015-20, is a key provision to help meet exporters need for cheap funds. It extends a subsidy on interest provided on pre- and post-shipment export credit ranging between 3 per cent and 5 per cent.

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.

“ Because of the Covid-19 pandemic, the new five year FTP could not be announced as scheduled on April 1, 2020 and the earlier one got extended for a year. The interest subvention scheme, too, got a one-year extension. However, in the on-going fiscal, the scheme was extended twice for a period of three months each. This creates uncertainty for exporters,” the official explained. Exporters bodies, like the FIEO, have been petitioning the government for a longer extension of the scheme. Certainty about the continuity of the scheme would help exporters in pricing their products competitively as they would be able to factor in the concession without worrying about a roll back.

The scheme was last extended from July to September 30, 2021.

Long-term extension

“The Commerce Ministry is in discussions for a long-term extension of the interest equalisation scheme and may soon work on a note for the Expenditure Finance Committee’s sanction,” the official said.

India’s exports suffered a setback in 2020-21 due to the Covid-19 pandemic and outbound shipments declined by 7.26 per cent (year-on-year) to $290.63 billion.

However, with a re-bound in global demand, things seem to be on the mend with exports, in the April-July 2021 period, at $130.53 billion, up by 73.51 per cent over the same period of 2020 and by 21.82 per cent over same period of 2019.

An ambitious export target of $400 billion has been set for the current fiscal by the Commerce Ministry.

Published on August 08, 2021

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