Increase in packing credit interest subsidy from 3% to 5% sought

Tirupur Exporters' Association (TEA) on Wednesday sought an increase in packing credit interest subsidy from three to five per cent.

TEA president K N Subramanian said the major requirement for Tirupur is increase in the interest subvention provided under the interest equalisation scheme from 3 per cent to 5 per cent across the board as was existing in the pre-COVID period.

Subramanian, in a statement, requested the RBI to extend the export refinance scheme to banks to augment export credit. Under such a mechanism, banks may be encouraged to provide export credit in rupee to exporters and the same amount can be refinanced by the RBI at the repo rate, he said.

Such mechanism would cut the interest cost for export credit providing the much-needed competitiveness to exports, he said.

Subramanian advised exporters to opt for foreign currency denominated credit and provide comfort during the extreme volatility in dollar, without any hedging cost.

In the wake of the unusual business scenario in the global market due to the twin impact of the Ukraine war and the COVID-19 pandemic, Subramanian said there has been a declining export trend of Tirupur knitwear in the past four months.

If the banks resort to increase export credit rate at this juncture, then the competitiveness of knitwear export sector would get reduced at a time when competing countries have reduced the rate of interest and also deep depreciation of their currencies, he added.