FIEO seeks 5% interest subvention as high US tariffs delay export payments

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Seeking resumption of interest subsidy scheme, the Federation of Indian Export Organisations (FIEO) on Tuesday said the additional 26 per cent US tariffs from April 9 will significantly raise American importers' customs duty bills, delaying payments to Indian exporters.

The organisation urged the government to immediately announce a 5 per cent interest subvention to ease the looming liquidity crunch.

"From April 9, the US importers will have to pay 26 per cent duty upfront. Earlier it was zero-4 per cent. The high tariffs will put an additional burden on them, and for that, they would have to seek credit and delay our payments. 

The tariffs are going to impact the payment cycle for us. We request the government to immediately announce an interest subvention scheme for all the exporters," FIEO President SC Ralhan told PTI.

In India, the repo rate stands at about 6.25 per cent, with exporters bearing interest rates ranging between 8 to 12 per cent or even more, depending on the spread and risk assessment of the borrower by the Authorised Dealer Banks.

In competing countries, the interest rate is very low. For instance, the central bank rate in 2025 is 3.1 per cent in China, 3 per cent in Malaysia, 2 per cent in Thailand, and 4.5 per cent in Vietnam.

About 11,000 exporters avail the benefits under the scheme, which ended last year.

The commerce ministry is working to develop the scheme again under the Export Promotion Mission, which was announced in the Budget with an allocation of Rs 2,250 crore.

Ralhan also said that buyers in the US are demanding 12-14 per cent discount to confirm the orders and to minimise the impact of high import duties.

"They are not ready to absorb all the duty. We have to share the burden with them. They are telling us to hold the consignments. Indian exporters can give 3-4 per cent discounts, but not more than that," he added.

When asked about the possibility of dumping by countries like China, Thailand and Vietnam as they are facing more tariffs than India, he said traders are concerned about that and the government should come forward to help them.

"I think imports will go up in the coming months. The government should be ready to impose duties to check dumplings," the Ludhiana-based engineering exporter said.

In 2023-24, the US was the largest trading partner of India, with USD 119.71 billion bilateral trade in goods (USD 77.51 billion worth of exports, USD 42.19 billion of imports and USD 35.31 billion trade surplus). China was the second largest trading partner with USD 118.39 billion two-way commerce (USD 16.65 billion exports and USD 101.73 billion imports and USD 85 billion trade deficit).

The US accounts for about 18 per cent of India's total goods exports and 6.22 per cent in imports, and 10.73 per cent in bilateral trade. On the other hand, China's share is just about 4 per cent in exports and a staggering 15 per cent in imports.