The government has extended the interest equalisation scheme (IES) for pre and post shipment export credit for a month pending final decision on whether the scheme should stay for a much longer period.
This is the second extension of the scheme after it ended on June 30. In July it was extended for two months till the end of August but only for Micro Small and Medium enterprises that export their own manufactured products and Rs 750 crore were allocated for it.
The latest extension for the month of September is also limited to MSME manufacturing exporters, according to a trade notice by the Directorate General of Foreign Trade.
Till June the interest equalisation scheme provided upfront reduction in interest rates on per-shipment and post shipment export credit by banks. The exporters from Micro Small and Medium Enterprises exporters got a rebate of 3% on loans under the scheme. The merchant exporters who source goods for exports from other manufacturers and others use to get 2% benefit for exports of 410 identified products. The discount given by banks is reimbursed by the government.
The commerce ministry is seeking a five-year extension of the scheme on the same terms which existed before June 30. Exporters are asking for the subsidy amount to be raised to 5% for MSMEs and 3% for merchant exporters as interest rates have gone up since the rates were set.
An official had recently said that a decision on the extension of the scheme will take time as it is yet to be examined by the Expenditure Finance Committee.
The EFC is an appraisal body in the Ministry of Finance that considers proposals. The EFC is one of several appraisal bodies that recommend proposals to the Cabinet or Cabinet Committees.
The scheme was initially launched on April 1, 2015 for a five-year period till March 2020. Due to COVID it got a one-year extension in 2020. Later more extensions were accorded and the latest one is to end on June 30.
When the scheme was launched it offered a rebate of 5% to MSME exporters and 3 % manufacturers and merchant exporters and they were reduced to the current levels 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. Around Rs 1700 crore has been provided for the scheme in the budget for 2024-25.
“The allocation for the scheme in the budget is for the current liabilities. For extension of the scheme additional allocation will be required,” the official had said.