It has also provided exemption from the payment of IGST and compensation cess on the imports made under Advance/EPCG authorisations and by export-oriented units by up to March 2021.
Exporters struggling to cope with the negative fallout of the COVID-19 outbreak are in for relief, as the government is considering a raft of proposals — including extending a 2-4% interest subsidy on soft loans to them, expanding the interest equalisation scheme and allowing large companies and those in special economic zones (SEZs) to resume manufacturing in a staggered manner.
“Exporters may be offered the interest subsidy on loans under a new scheme or the government may wish to enhance the scope of the existing interest equalisation scheme to help them. Various proposals are being discussed. A decision will be made soon,” a source told FE.
If finally approved, a new interest subsidy scheme could cost the government up to Rs 3,000 crore in FY21, depending on the actual loan disbursement, on top of the Rs 2,300 crore allocated for the equalisation scheme in the Budget for this fiscal. The interest equalisation scheme usually allows manufacturing and merchant exporters an interest subsidy of 3% on pre-and-post-shipment rupee credit for exports of 416 products (tariff lines). Exporters are estimated to have received Rs 2,868 crore under the equalisation scheme in FY20.
The Federation of Indian Export Organisations (FIEO) has already warned of 15 million job losses due to the pandemic if the government doesn’t step in swiftly with a relief package.
Some of the other measures being considered are extension of the pre-and-post-shipment credit by 90 days on their maturity and automatic enhancement of working capital limit of eligible exporters by 10-25% to help them tide over an immediate liquidity shortage.
Large exporters and those in the SEZs, especially in those areas that have seen no or a very few COVID-19 cases, may be allowed to start functioning with limited workforce, to start with. This is aimed at enabling them to honour a part of their supply contracts.
Commerce and industry minister Piyush Goyal is in talks with the ministries of home and finance and a package would be hammered out soon after clearance from the Prime Minister’s Office, said the source quoted earlier.
Already, in a letter to home secretary Ajay Bhalla, Guruprasad Mohapatra, secretary of department for promotion of industry and internal trade, said companies, including MSME-exporters, should also be allowed to operate with minimal manpower. The necessary notification may be issued to allow the movement of man and material, and their export commitments need to be verified while issuing passes, it said. The industries which should be allowed to start operations with limited workforce include heavy electricals, telecom equipment and components, steel and ferrous alloy, spinning and ginning, defence and cement, it added.
The government may also allow certain SEZ units that deal with essential items like medicines to supply to the domestic markets at zero duty for a limited period. Currently, SEZ units are allowed to do so after paying the customs duty (MFN) applicable to the relevant product.
Exporters have already warned of a massive plunge in outbound shipments in FY21, as global supply chain has been hit hard, cargo movement has been affected, shipping lines altered and warehouse capacity stretched following the COVID-19 outbreak. More than a third of the export orders have already been cancelled. Up to February last fiscal, overall goods exports contracted by 1.5% year-on-year to $293 billion. Analysts now say goods exports in FY20 may drop to $315 billion or less, against $330 billion in the previous year.
To help exporters, the commerce ministry has already extended the validity of the foreign trade policy for 2015-20 by a year through March 2021. The extension will enable exporters to continue to get incentives under existing programmes — including the Merchandise Exports From India Scheme (MEIS), interest equalisation scheme and transport subsidy scheme (for farm exports) — without disruption for one more year.
The ministry has extended the validity period of the Status Holder Certificates. It has also provided exemption from the payment of IGST and compensation cess on the imports made under Advance/EPCG authorisations and by export-oriented units by up to March 2021. The validity period for making imports under various duty-free import authorizations expiring between February 1 and July 31 has been allowed automatic extension for another six months from the date of expiry. Last dates for applying for various duty credit Scrips (MEIS/SEIS/ROSCTL) and other authorisations, too, have been extended.
(With inputs from Sumit Jha)