The Interest Equalisation Scheme (IES) for exporters which is expected to make a comeback next week will provide 2.5% to 3% interest subsidy on pre and post shipment credit, an official said. The annual benefit will be capped at Rs 50 lakh per exporter.
New limits and targeted focus
The IES which was announced as part of the Export Promotion Mission (EPM) approved by Cabinet on November 12, will be limited to select sectors which are facing the maximum pressure of 50% additional duties in the US market.
The IES which was functional earlier provided a 3% subsidy to micro, small and medium enterprises on pre-shipment and post-shipment export credit. This was available to those exporters who were also manufacturers. The scheme ended on December 31, 2024.
While the extent of benefit may remain unchained, the explorers want limits of per exporter benefit to be set higher than Rs 50 lakh. They want the limit to be set at Rs 10 crore as it existed earlier.
Since the scheme ended, the exporters have been seeking its revival 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 ranges from 8-12%.
History and cost of India’s export credit lifeline
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 Cr for FY 2024-2025 was provided but the spending was Rs 2482 crore. This sum was lower than previous year as the scheme ran only for none months.
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 on working capital loans are reimbursed by the government.
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.