The government is scrutinising the interest equalisation scheme for exporters to analyse its usefulness in promoting exports so far, including from the MSME sector, to decide if it should be continued beyond June 30 2024, sources have said.
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“The DGFT office is holding consultations with various export bodies and banks to have more clarity on those benefitting from the scheme and find out if it actually played a role in promoting exports,” an official told businessline.
The interest equalisation scheme, first implemented in April 2015 for five years, allows exporters of 410 identified products and all exporters from the MSME sector, to get bank credit at a subsidised interest rate determined by the government. The banks are later reimbursed by the government for their lower interest earnings. The scheme has since got a number of extensions and the last one is set to lapse on June 30, 2024.
“There is a need for a detailed analysis of beneficiaries of the scheme under various sectors to pinpoint where the benefits are accruing and if a correlation can be established with growth in exports. If no direct correlation can be established, then the government will take a call on whether it should be withdrawn completely or for certain sectors,” the official said.
The Commerce and Industry Ministry has already been taking steps to ensure a better distribution of the outlay set aside for the interest equalisation scheme to ensure that it is not cornered by just a few.
Last year, the government introduced a cap of ₹10 crore per Importer Exporter Code (IEC) on the annual net subvention amount. This means that an individual unit cannot claim equalisation benefits beyond ₹10 crore.
In December 2023, an additional outlay of ₹2,500 crore, over and above the current outlay of ₹9,538 crore under the scheme, was approved by the Union Cabinet to bridge the funding gap to continue the scheme up to June 30, 2024.
Currently the scheme provides an interest equalisation benefit at the rate of 2 per cent on pre and post shipment rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines at four digit level and 3 per cent to all MSME manufacturer exporters.
Exporter bodies have been asking the government to increase the subsidy rate to 5 per cent for MSME exporters and 3 per cent for others to help them be more competitive and cope better with global headwinds and the uncertain geopolitical scenario. In FY2023-24, India’s goods exports declined 3.11 per cent to $437.06 billion.