The ministry of commerce and industry may seek the return of interest subsidy scheme for exporters in its original form in the general budget as the exporters face rising uncertainty in view of recent pronouncements of US President-elect Donald Trump.
The Interest Equalisation Scheme (IES) which completed its term on December 31, 2024 provided a 3% subsidy to micro, small and medium enterprises on pre-shipment and post-shipment export credit. Prior to June 30, 2024 the scheme also covered merchant exporters who source goods for exports from other manufacturers but their benefit was capped at 2% for exports of 410 identified products. The discount given by banks used to be reimbursed by the government.
The return of the scheme in its original form for another five years as they maintain that high credit costs in India as compared to other countries hurts their competitiveness. Exporters say that export credit in countries they are competing with is priced at 2-3% while in India it touches 10%.
Benefits to individual exporters under the scheme were capped at Rs 50 lakh crore per annum per IEC (Import Export Code) and export organisations have asked for the higher limit of Rs 10 crore.
When the scheme was initially launched on April 1, 2015 it was to run for a five-year period till March 2020. Due to COVID it got a one-year extension in 2020. Later more extensions were accorded. It finally ended on December-end with no replacement being offered through exporters and the Ministry of Commerce and Industry have been seeking its return.
When the scheme was launched it offered a rebate of 5% to MSME exporters and 3 % manufacturers and merchant exporters and they were reduced in October 2021.
The scheme costs the government around Rs 3200 crore a year. In 2023-24 Rs 3700 crore were spent on the scheme. The budget of Rs. 1700 crore for 2024-2025 has been provided for meeting the liability incurred by Banks till June 30, 2024, which was the earlier sunset date of the scheme