Garmenters seek extension of interest subvention scheme

Garmenters state interest subvention was helping in cutting down on export costs in the competitive global market

Facing growing global competition in apparel exports, the garment industry has sought an extension of the interest subvention of 3 per cent that had expired in March 2014 from the central government. Garmenters state the interest subvention was helping in cutting down on export costs in the competitive global market.

When an exporter applies for loan for working capital requirements, under the interest subvention scheme, the central government pays three per cent of the total interest to the bank, while the apparel exporter pays the rest. Last fiscal, the reduced burden of interest on loan led to benefit worth Rs 350-400 crore for apparel exporters.

However, the scheme was not extended in the new fiscal 2014-15.

“Working capital forms 65 per cent of the FOB value for a garment exporter. The interest subvention was able to reduce burden on the exporter, thereby helping him to be competitive in terms of pricing of the finished product in the international market,” said a senior official at the Apparel Exporters Promotion Council (AEPC).

According Jitendra Dugar, director and CEO of Go Go International, an apparel exporter, the industry was expecting announcement with regards to interest subvention scheme in the Union Budget. “We are still hopeful the announcement may come anytime soon. We have been making representations with the government through related associations and industry bodies such as AEPC,” said Dugar.

Representations have been made with the Ministry of Commerce, Ministry of Textiles as well as RBI, said industry players.

“In the absence of interest subvention, apparel exports have become costlier for us since we now have to pay more on working capital loan. Moreover, while the industry was able to achieve a healthy growth of 15 per cent last year in overall apparel exports, a similar growth is expected this year,” said A Sakthivel, former chairman of AEPC.

Meanwhile, Sakthivel added that the industry has sought for extension of interest subvention retrospectively from April 2014 onwards.  In last fiscal 2014-15, the industry pegged apparel exports to the tune of $15 billion.