The government has announced that the Interest Equalisation Scheme for exporters, which provides access to bank credit at subsidised rates, will be extended for the MSME sector for an additional two months beyond the 30 June deadline. This decision, communicated through a notification, specifies that the extension will not apply to non-MSME exporters.
A trade notice issued by the Directorate General of Foreign Trade (DGFT) on Friday stated, "Claims of non-MSME exporters are not to be entertained beyond 30 June 2024."
The extended scheme for the MSME sector will have an outlay cap of Rs 750 crore. According to the notification, all other terms and conditions of the scheme will remain unchanged.
Non-MSME exporters have expressed disappointment over the discontinuation of the scheme for 410 products that were previously eligible for the benefit. They had hoped for an extension of 3-5 years. Ashwani Kumar, President of the Federation of Indian Export Organisations (FIEO), remarked, "This may affect exports of labour-intensive products which have lost market share in the past few years. Many merchant exporters play a pivotal role in exporting such products, and the exports of some large companies may also be impacted."
First implemented in April 2015 for five years, the Interest Equalisation Scheme has seen several extensions, with the latest set to expire on 30 June 2024. Currently, the scheme provides a 2 per cent interest subvention or subsidy on loans taken by exporters from 410 identified sectors and a 3 per cent subvention to exporters of all products from the MSME sector.
The decision to discontinue the scheme for non-MSME exporters followed a review by the Finance Ministry, which asked the DGFT to conduct a study on its usefulness. The DGFT consulted with exporters and banks, ultimately recommending the scheme's continuation in its report.
In its submission to the government, the FIEO argued that the Interest Equalisation Scheme offered much-needed competitiveness to Indian exports and should be extended for 3-5 years. The FIEO also advocated for higher subvention rates, citing the significantly higher interest rates in India compared to competitor countries.
