Exporters have urged the government to extend the interest equalisation scheme (IES) that is set to lapse on June 30, to help small exporters grappling with high interest rates and faltering exports.
Under the scheme, banks provide loans to exporters at a lower interest rate, and the lenders are thereafter compensated by the government. IES was launched close to a decade ago to reduce stress among exporters, especially in labour-intensive sectors as well as micro, small and medium enterprises (MSMEs).
However, before taking a decision on the extension of the scheme, the government has begun the assessment of how the scheme is helping exports.
In a statement, the apex body for exporters, Federation of Indian Export Organisations (FIEO), on Monday said that the scheme provides competitiveness to Indian exports, particularly to MSMEs, as the interest costs in India are much higher than in other countries.
“The bank rate in India is 6.5 per cent whereas the bank rate in many of our Asian economies is around 3.5 per cent. With a higher spread, the credit cost in India is generally over five to six per cent as compared to such countries,” FIEO President Ashwani Kumar said, adding that the scheme is more relevant now since exporters are looking for larger credit due to a huge increase in sea and air freight.
“The interest subvention rates may also be enhanced from three per cent to five per cent for manufacturers MSMEs and from two per cent to three per cent for 410 tariff lines respectively as when the subvention was reduced, the repo rate was 4.4 per cent which has gone up and currently is 6.5 per cent. This justifies the restoration of the interest subvention to the original level of five per cent and three per cent respectively so as to provide necessary competitiveness to our exports,” he said.
Right now, the rate of interest equalisation is two per cent for some manufacturers and merchant exporters for 410 identified products and three per cent for MSME manufacturers.
A budgetary outlay of Rs 9,538 crore was allocated to the scheme. However, the amount was not enough to cover the scheme until March 31. The government thereafter made an additional outlay of Rs 2,500 crore earlier this year.
First Published: Apr 29 2024 | 7:23 PM IST
