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Commerce ministry mulls higher 5% rate for interest equalisation scheme

Cost of export incentives could go up to Rs 1 trillion

Subhayan Chakraborty  |  New Delhi 

Commerce and Industry Minister Suresh Prabhu
Commerce and Industry Minister Suresh Prabhu

Less than a week after the Budget spoke of leveraging India’s small- and medium-scale industry, the commerce ministry has suggested improvement in an export promotion scheme. on Thursday said the cost of export incentives might lie somewhere between Rs 700 billion and Rs 1 trillion in 2018-19. The commerce ministry has proposed to its finance counterpart that the prescribed rates under the be revised upwards from 3 per cent to 5 per cent. The scheme allows small and medium exporters in labour-intensive sectors to avail loans from banks at a lower rate of 3 per cent. Originally announced as a measure to boost exports for five years, the on pre- and post-shipment rupee export credit was revived in 2015 at a rate of 3 per cent for 416 tariff lines.

The sectors covered are mostly labour intensive and include agriculture or food items, auto components, handicraft, electrical engineering items, and The scheme is, however, not available for merchant exporters. The last Budget had allocated Rs 25 billion for the “This is a welcome move and should be done, provided the condition that interest rate after subvention will not fall below 7 per cent, is also removed. Until the condition is in place, benefits of 5 per cent will not materialise for exporters on ground,” Ajay Sahai, director-general of the Federation of Indian Exports Organizations, said, adding merchant exporters and those on the services side should also be included in the Agriculture, which is a mainstay of the Indian economy, and also a major source of livelihood of people, have been given an important thrust, Prabhu said. On the agriculture export policy, he said existing incentives for exporters would continue to be valid, but the government would be exploring newer ways to boost the sector. On the Budget raising the minimum support price (MSP) for crops to 1.5 times of the cost of production, the minister said higher rates of MSP would not lower the prospects for agri exports. “The presumption that international prices are lower than MSP is not necessarily true.”

First Published: Fri, February 09 2018. 05:52 IST
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