According to an official, the commerce ministry intends to pursue an additional five-year extension of the interest equalization plan on pre- and post-shipment rupee export credit in order to boost the nation's outbound exports. This year's program will expire on June 30.
"The government will redesign several programs, such as the interest equalization program. We would suggest extending the plan for an additional five years. The program is working well and benefiting the exporters," the representative stated.
The Union Cabinet decided to allocate an extra Rs 2,500 crore on December 8, 2023, so that the initiative may continue till June 30.
During a time when the global economy is experiencing challenges, the program assists exporters from designated industries as well as all MSME manufacturers in obtaining rupee export credit at favorable rates. Under the "Interest Equalization Scheme for pre- and post-shipment rupee export credit," exporters are eligible for subsidies.
To close the financing gap and carry out the plan through June 2024, an extra expenditure of Rs 2,500 crore was made available, on top of the present outlay of Rs 9,538 crore under the initiative.
Commencing on April 1, 2015, the program had a five-year initial validity period ending on March 31, 2020. Subsequently, it has been extended for an additional year during COVID-19, along with other extensions and funding allocations.
Presently, the program offers merchant and manufacturer exporters of 410 designated tariff lines at the 4-digit level an interest equalization benefit at the rate of 2% on pre- and post-shipment rupee export loan, and 3% to all MSME manufacturing exporters. Handicrafts, leather goods, specific textiles, carpets, and ready-made clothing are some of these industries.
Benefits to individual exporters are now restricted at Rs 10 crore annually per IEC (Import Export Code), and the plan has been become fund-limited. A statement from the ministry of commerce stated that the program will debar banks that lend to exporters at an average rate higher than Repo +4%.
The RBI carries out the program through a number of public and private sector banks that give exporters pre- and post-shipment loans. Through a collaborative process, the RBI and the Directorate General of Foreign Trade (DGFT) jointly oversee it.
The government has paid out Rs 2,641.28 crore under the plan from April 2023 to November 30, 2024, compared to the Rs 2,932 budget that was allotted. In 2022–23, Rs 3,118 crore was disbursed, and in 2021–22, Rs 3,488 crore. Exporters said that the program is supporting them during these unsettling times.
According to Ashwani Kumar, President of the Federation of Indian Export Organizations (FIEO), the scheme's assistance measures boost Indian exporters' competitiveness in global markets.
"China's two to three percent interest rate greatly benefits its exporters. The local government need to seriously think about expanding the program, according to Kumar.
India's monthly exports reached a new high of USD 41.4 billion in February, up 11.9%, mostly due to a surge in shipments of pharmaceutical, electrical, and engineering goods. From April through February of 2023–2024, exports totaled USD 395 billion, down from USD 409.11 billion in the same period in 2022–2023.
