Cabinet Committee on Economic Affairs approves Rs 2,500 cr additional funds

Exporters engaged in handicrafts, handlooms, carpets and small & medium enterprises on Thursday got a bit of comfort. The Cabinet Committee on Economic Affairs (CCEA) approved Rs 2,500 crore in additional funds to banks to give two per cent interest subvention on rupee credit to these exporters. The government recently extended the scheme for exporters of these four sectors by a year up to the end of this financial year.

Over Rs 1,250 crore would be given on the basis of the Reserve Bank of India’s projection for the period up to March 2011 and Rs 800 as estimated by the department of financial services for the financial year.

Till date, Rs 1,654 crore has been released for the reimbursement of interest subvention claims, whereas total requirement projected by the RBI for the period up to March 2011 is Rs 3,892 crore.

THE BENEFITS

* Exporters engaged in handicrafts, handlooms, carpets and small & medium enterprises receive a bit of comfort

* Government recently extended scheme for exporters of these sectors by a year up to the end of this financial year

* Despite India diversifying into newer markets, the euro zone crisis is affecting exporters badly

Hence, the balance Rs 2,238 crore is pending. Out of this, the commerce department has the approval of CCEA for Rs 996 crore. The approval for the balance Rs 1,250 crore was given on Thursday. The Rs 996 crore will be released to the RBI as and when the funds are made available to commerce department under the relevant head.

Meanwhile, the department of financial services indicated an additional financial implication of Rs 800 crore in view of the government’s decision to extend the scheme.

The scheme was introduced in July 2007 to help exporters offset losses on account of global recession. In this scheme, operated by the RBI, the government gives interest subvention of two percentage points per annum to all scheduled commercial banks in respect of rupee export credit to the specified categories of exporters.

Exporters are facing hard times due to the euro zone crisis. Despite India diversifying into newer markets and the share of the US and Europe coming down, the euro zone crisis is affecting exporters badly. In October, exports grew 10.8 per cent year-on-year, against 36.6 per cent in the previous month.