The government has been urged by the engineering exports promotion organization EEPC India to restore the Interest Equalization Scheme (IES), guarantee accessible export financing, and offer assistance in defraying a portion of the punitive tariff that the United States imposed on Indian engineering exports.

EEPC India Chairman Pankaj Chadha emphasized the engineering sector's vulnerability in the wake of recent US tariffs and asked for help in lowering borrowing costs for exporters during a meeting with Reserve Bank of India (RBI) Governor Sanjay Malhotra.

Key Highlights

• EEPC urges reinstatement of Interest Equalization Scheme, especially for MSMEs, to reduce export finance costs.
• Engineering exporters request government support to absorb portion of US tariffs to protect competitiveness.

"On average, India exports $20 billion worth of engineering to the United States, accounting for about 45% of all Indian exports subject to US tariffs. This emphasizes how vulnerable our industry is and how urgently the government must step in. The industry requires immediate government action in a few areas to lessen this loss," Chadha stated.

"EEPC India calls on the government to bring back the IES, especially for MSME or at least for the engineering sector's SME manufacturing units," he stated.

Chadha also brought attention to the difficulties MSME exporters encounter when trying to obtain loans for export financing without collateral.

"High collateral requirements still make it difficult for MSMEs to obtain financing from banks and other financial institutions. Additionally, MSMEs are disproportionately impacted by the credit rating system that banks use to determine collateral and interest rates. In addition to offering significant collateral, MSMEs consequently pay higher interest rates," he stated.

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The chairman of EEPC India also pointed out that engineering exporters' exposure to the US has affected their credit rating and recommended that rating agencies exclude US exposure from their credit rating calculations, at least for this year.

It was also noted during the meeting with the RBI Governor that there is an average 30% duty differential between India and its rival countries. According to EEPC India, the government must provide support for the remaining 15% of the tariff, either in the form of scrip or by obtaining exchange conversion at the REER rate of exchange, even though the industry can absorb 15% of it.