Exporters are urging the government to expand the interest equalization scheme
Exporters have urged the government to extend the interest rate equalization program (IES), which expires on June 30, to provide a lifeline to small exporters struggling with high interest rates and faltering exports.
Through the IES, banks provide loans to exporters at reduced interest rates, after which the lenders are compensated by the government. IES was launched almost a decade ago to reduce stress among exporters, especially in labor-intensive industries and micro, small and medium enterprises (MSMEs).
However, before taking a decision on the extension of the scheme, the government has started assessing how the scheme will help exports.
In a statement, the apex body for exporters, the Federation of Indian Export Organizations (FIEO), said on Monday that the scheme provides competitiveness to Indian exports, especially MSMEs, as interest costs in India are much higher than other countries.
“The bank rate in India is 6.5 percent, while the bank rate in many of our Asian economies is around 3.5 percent. With a wider spread, the cost of credit in India is generally more than 5 to 6 percent compared to such countries,” said FIEO President Ashwani Kumar, adding that the scheme is more relevant now as exporters are looking for bigger credits due to the huge credit crisis. increase in sea and air freight.
“The interest subvention rates can also be increased from 3 percent to 5 percent for manufacturers and MSMEs, and from 2 percent to 3 percent for 410 tariff lines. When the subsidy was reduced, the repo rate was 4.4 percent. This has currently risen to 6.5 percent. This justifies the restoration of the interest subsidy to the original levels of five percent and three percent respectively to provide the necessary competitiveness for our exports,” he said.
Currently, the interest equalization is 2 percent for some manufacturers and exporters for 410 identified products and 3 percent 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 subsequently made an additional expenditure of Rs 2,500 crore earlier this year.
First print: April 29, 2024 | 7:23 PM IST