Exporters say access to cheaper credit essential in retaining competitiveness
The Commerce Ministry may ask the RBI to extend the Interest Equalisation Scheme for exporters beyond June 30, 2021, till the end of fiscal 2021-22, to help exporters gain back lost ground due to the on-going Covid-19 pandemic and fight the slowdown in the global trade.
“A number of exporters and export bodies have asked the government to provide the interest equalisation benefit for the entire year because without the subsidy their competitiveness would be hit further since the pandemic related uncertainties were continuing to pose a challenge,” an official told BusinessLine.
The scheme, announced in April 2015, extends a subsidy on interest provided to exporters on pre- and post-shipment export credit varying between 3 per cent and 5 per cent. The banks give credit at lower interest rates to exporters and the government then refunds the difference in amount to the banks. Exporters from 416 identified sectors are eligible for this benefit in addition to all export units belonging to the MSME sector.
Last fiscal, the Interest Equalisation Scheme got extended by a year simultaneously with a one-year extension of the old Foreign Trade Policy (FTP) announced in 2015. A new five-year policy could not be announced due to the pandemic.
In the current fiscal, the FTP has been extended by another six months, till September 30, due to the continued uncertainties on the foreign trade front. However, as of now, the Interest Equalisation Scheme has been extended only till June 30, 2021.
Meet with export bodies
“The Commerce Minister recently had an interaction with export bodies where there were requests for an extension of the Interest Equalisation Scheme beyond June 30. Exporters say that they are already fighting competition at several fronts, especially from countries like Vietnam and Bangladesh that were given preferential market access in developed countries, and the withdrawal of the Interest Subsidy Scheme could deal a further blow to their competitiveness,” the official said.
The Union Budget for 2021-22 has made a provision of ₹1,900 crore for the Interest Equalisation Scheme so funding should not be an issue, the official added.
India’s exports had posted a fall of 7.26 per cent in the financial year 2020-21 to $290.63 billion as outbound shipments had been hit massively in the initial months of the fiscal due to Covid-19 lockdown in the country and across the world. Exports in April 2021, however, have shown a sharp recovery encouraging the government to fix the export target for the on-going fiscal at $400 billion.