Centre mulls extending interest subsidy scheme for exporters

With exporters seeking assistance to survive the Covid-19 crisis that has disrupted businesses globally, the Centre is looking at extending the interest equalisation (subsidy) scheme for select sectors for some more time, say officials.

The Commerce and Industry Ministry is in discussions with the Finance Ministry and the Prime Minister’s Office on the need to re-introduce or extend the interest equalisation scheme, which is basically an interest subsidy scheme for exporters from select sectors that lapsed on March 31, 2020, a government official told BusinessLine .

The plan is to extend the popular scheme, which benefits a wide range of exporters, by at least a few months.

“Exporters urgently need financial help as not only are they losing orders with production halting due to the national lock-down but their shipments and payments are also stuck. If the interest equalisation scheme, which provides credit at a lower interest rate, is not extended, they may be further crushed,” the official said.

The scheme, earlier called interest subvention scheme, was announced for a period of five years, from April 1, 2015 to March 31, 2020, for 416 selected tariff lines, many of them involving labour-intensive production, such as readymade garments, automobile parts, processed agriculture/food items, handicrafts, glass and glassware, medical and scientific instruments and pharmaceuticals. The scheme also covered all items exported by the MSME (micro, small & medium enterprises) sector.

While the scheme initially offered a 3 per cent subsidy on pre- and post-shipment export credit to all beneficiaries, the rate was enhanced to 5 per cent for the MSME sector in 2018.

Industry bodies such as CII and exporters’ organisations including the Federation of India Export Organisations and EEPC India have already urged the government to extend the scheme.

“Most exporters are hopeful that the interest equalisation scheme will be extended given the dire situation they are in but the delay in decision-taking is making them restless. The Commerce & Industry Ministry is trying to expedite the process,” the official said. While the Foreign Trade Policy, which was to lapse on March 31, 2020, was extended by the Centre by one year, no decision was taken on the interest equalisation scheme.

India’s exports of goods in March 2020 plummeted 34.57 per cent to $21.41 billion (year-on-year) as the spread of Covid-19 across countries disrupted production and supply chains globally. This pulled down overall export figures for financial year 2019-20 by 4.78 per cent to $314.31 billion.

Exporters fear that performance in April and May would be worse when the full impact of the Covid-19 crisis plays out.

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