Interest subvention scheme for exporters on cards

Under the scheme, a portion of the rates is reimbursed by govt to lenders; loans at subsidised rates would help exporters boost shipments

The government is set to announce an interest subvention scheme for exporters to arrest the persistent fall in merchandise exports.

"The interest subvention scheme is to be announced soon, which will give encouragement to sectors that have high potential," commerce and industry minister Nirmala Sitharaman said during a function here on Friday.

Exports fell for a seventh month in a row by 15 per cent in June, although the rate of contraction came down from 20 per cent in the previous month.

The minister said exports were hit owing to subdued international demand and depreciating currencies, particularly the euro.

"The triggers for improving export performance are not really happening," said Sitharaman, adding the ministry had discussed the matter with industry groups to find ways to push exports and explore new markets.

Under interest subvention scheme, a portion of the rates is reimbursed by the government to lenders. This would help exporters in fiercely-competitive global markets.

The government had announced such interest subvention scheme of three per cent in 2008-09. It expired on March 31, 2014. There was no subvention in 2014-15.

Exporters believe a three per cent subvention would be given this time as well.

Ajay Sahai, chief executive director and director-general of the Federation of Indian Export Organisations, said the scheme that expired in 2013-14 was applicable to all micro, small and medium enterprises (MSME) engaged in exports, 235 tariff lines of engineering goods, handicrafts, apparel, garments and made-ups, among others.

According to him, interest subvention could be in these sectors this time as well. He said the MSME sector gets loans at 12-13 per cent at present. After subvention, this would come down to 9-10 per cent. However, India's competitors get it at around five per cent, he said.

Besides, the payment cycle has elongated. Now, the importers of Indian exports are paying only when they get payments from consumers, Sahai said.

Sitharaman said irrespective of the Greek debt crisis, the ministry was "certainly going ahead" with the proposed free trade agreement with the European Union. Both sides are expected to meet next month to start the talks.

She added the ministry was moving forward on other such agreements including that with the European Free Trade Association and a few with Latin American countries.

When asked about a report that the government has asked chief economic advisor Arvind Subramanian to look into the country's free trade agreements, she said: "The finance ministry would do it for their reasons because investments and investment protection agreements will have to be given a final shape by the ministry itself."

Regarding a question on steel producers' demand to impose duty on imports from China, the minister admitted Chinese steel was cheaper but said the government would have to take a balanced view, looking into the interest of the SMEs using imported steel.

"I will have to highlight a few things. Dumping... distorts the market. But Indian steel is very expensive. Many small industries that depend on steel as raw material have also come to us and said they need cheap raw material," she said.

Declining to comment on the Posco issue, the minister expressed the hope that there was an opportunity for Odisha to benefit from the proposed $12-billion steel project.

On Nokia's suspension of production, she said a lot of efforts had gone through to understand "as how best we can revive, see for an Indian buyer...we do not want any unit to get closed. Of course, there were legal issues there".

EASING NORMS FOR EXPORTERS

• Under an interest subvention scheme, a portion of the rates is reimbursed by the government to lenders
• Loans at subsidised rates would help exporters boost shipments
• The interest subvention scheme of three per cent ended on March 31 last year, there was no subvention in 2014-15