Commerce ministry may seek 5-year extension of interest equalisation scheme

The commerce ministry is likely to seek further extension of the interest equalisation scheme in the forthcoming Budget on pre- and post-shipment rupee export credit for another five years to promote the country's outbound shipments, an official said.

The scheme ended on December 31 last year.

The scheme helps exporters from identified sectors and all MSME manufacturer exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds. Exporters get subsidies under the Interest Equalisation Scheme for pre- and post-shipment rupee export credit.

"The ministry may request for the extension of the scheme," the official said.

The scheme was started on April 1, 2015, and was initially valid for five years up to March 31, 2020. It has been continued thereafter, including a one-year extension during COVID-19, and with further extensions and fund allocations.

In September last year, the government extended the scheme till December 31, 2024.

Earlier, the scheme provided an interest equalisation benefit at the rate of 2 per cent on pre- and post-shipment rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines (or product categories) at 4-digit level and 3 per cent to all MSME manufacturer exporters. These sectors include handicrafts, leather, certain fabrics, carpets and readymade garments.

Benefits to individual exporters were capped at Rs 50 trillion per annum per IEC (Import Export Code).

The scheme was implemented by the RBI through various public and non-public sector banks that provide pre- and post-shipment credit to the exporters.

It is jointly monitored by the Directorate General of Foreign Trade (DGFT) and RBI through a consultative mechanism.

From April 2023 to November 30, 2024, the government disbursed Rs 2,641.28 crore against the allocated budget of Rs 2,932 crore under the scheme. Rs 3,118 crore was disbursed in 2022-23 and Rs 3,488 crore in 2021-22.

Exporters too are demanding extension of the scheme saying it is helping them in the current turbulent times.

Federation of Indian Export Organisation (FIEO) President Ashwani Kumar said the support measures under the scheme help in increasing the competitiveness of Indian exporters in the international markets.

"In China, the rate of interest is 2-3 per cent and that helps their exporters immensely. The government should positively consider extending the scheme," Kumar said.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget on February 1.