With the government setting a cap of ₹10 crore on interest subvention (subsidy) for individual exporting units under the popular interest equalisation scheme, exporters are hopeful that the move may translate into higher subsidy benefits for those falling below the cap, sources have said.
Earlier this year, the Finance Ministry had rejected a proposal by the Commerce Ministry for higher rates of subsidies for beneficiaries under the scheme due to financial constraints.
Last week, the government announced the capping of the amount of interest subvention–under which exporters of identified sectors are extended an interest subsidy on loans – ₹Rs 10 crore per IEC (import-export code) holder in one financial year.
“Once they capped ₹10 crore, some of the big exporters availing large amounts of interest subvention may be restricted and the money so saved could be used for increasing the interest subvention rates. That may be the thinking,” Federation of Indian Export Organisations DG Ajay Sahai told businessline.
Sahai said that Fieo was looking into which kind of companies were getting affected by the interest subvention cap and based on that a representation would be made to the government. “If the government is saving money, it can be used for increasing subvention rates. We will make a representation based on our calculations,” he said.
The interest equalisation rate for MSME exporters is three per cent for all products while it is two per cent for non-MSME exporters of 410 identified products that are covered under the scheme. Exporters had demanded that the subsidy rate should be increased to five per cent for MSMEs and three per cent for other sectors. The Commerce Ministry had forwarded the request to the Finance Ministry as exporters had argued that the cheaper finance would help them stay competitive in the global market hit by recessionary trends.
But the Finance Ministry rejected the request because of financial constraints, sources had said.
With the recent slowdown in India’s exports, mostly due to continued global uncertainty, the Commerce Ministry may have grounds for building a case again for more subvention.
India’s goods exports declined 12.7 per cent (year-on-year) in April 2023 to $34.66 billion. The Commerce Ministry said it was mostly due to recessionary trends in some developed economies and the lingering effect of the Russia-Ukraine conflict starting to make an “active impact’’.