Govt announces interest subsidy for SME exports

19 Nov 2015


In a bid to arrest the decline in exports, the government has announced an interest equalisation scheme on pre- and post-shipment rupee export credit with effect from 1st April, 2015 for five years.

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved a three-per cent interest equalisation scheme for exporters by small and medium enterprises (SMEs) in a move to boost exports.

''The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Narendra Modi, has given its approval for Interest Equalisation Scheme (earlier called Interest Subvention Scheme) on pre and post shipment rupee export credit with effect from 1 April 2015 for five years,'' the government said in a release.

The rate of interest equalisation would be 3 per cent. The scheme would be available to all exports made by small and medium scale enterprises across 416 tariff lines.

The scheme would not be available to merchant exporters.

''The cabinet's initiative to extend three per cent interest subsidy to exporters would give a much-needed boost to exports which have contracted by 18 per cent in the year so far,'' said Chandrajit Banerjee, director general, CII.

The scheme would be funded from the resources available with the department of commerce under non-plan during 2015-16 and the restructured scheme would be funded from plan side from 2016-17 onwards.

The ministry of commerce and industry may place funds in advance with the Reserve Bank of India (RBI) for requirement of one month and reimbursement can be made on a monthly basis through a revolving fund system.

On completion of three years of operation of the scheme, the department of commerce may initiate a study on impact of the scheme on export promotion and its further continuation. The study may be done through one of the IIMs.

The operational instructions of the scheme would be issued by RBI.

The proposed scheme is estimated to cost the government Rs2,500 crore to Rs2,700 crore per year.

However, the actual financial implication would depend on the level of exports and the claims filed by the exporters with the banks. Funds to the tune of Rs1,625 crore under non-plan head of account are available under demand of grants for 2015-2016, which would be made available to RBI during 2015-16.

The scheme covers mostly labour intensive and employment generating sectors like processed agriculture / food items and handicrafts. The scheme will help the identified export sectors to be internationally competitive and achieve higher level of export performance.

The scheme covers 416 tariff lines, consisting mostly labour intensive and employment generating sectors like processed agriculture/food items, handicrafts, handmade carpet (including silk), handloom products, coir and coir manufactures, jute raw and yarn and other jute manufactures, readymade garments and made-ups, fabrics of all types, toys, sports goods, paper and stationary, cosmetics and toiletries, leather goods and footwear, ceramics and allied products, glass and glassware, medical and scientific instruments, optical frames, lenses, sunglasses etc, auto components/parts, bicycle and parts, articles of iron or steel (notified lines), miscellaneous articles of base metals (notified lines), industrial machinery, electrical and engineering items, IC engine, machine tools, parts (notified lines), electrical machinery and equipment (notified lines), telecom instruments (notified lines) and all items manufactured by SMEs other than those covered above.

Announcing the scheme after the CCEA affairs meeting coal and power minister Piyush Goyal said the fall in exports was in value and not volume. ''The major factor behind the fall in exports has been petroleum products. India refines petroleum.

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