The Union Cabinet, presided over by Prime Minister Narendra Modi, has granted approval for an additional allocation of Rs. 2500 Crore to sustain the Interest Equalisation Scheme until June 30, 2024.
This move is aimed at providing support to exporters within identified sectors, as well as all Micro, Small, and Medium Enterprises (MSME) engaged in manufacturing and exporting. The extension of the scheme enables these entities to access competitive rates for both pre and post shipment Rupee export credit, fostering a conducive environment for their international trade activities.
Details:
Benefit shall be continued till 30.06.2024 to manufacturer and merchant exporters of the identified 410 tariff lines and to all manufacturer exporters from MSME sectors at rates as specified below:
| S.No. | Category of Exporters | Rate of interest Equalisation |
| 1 | Manufacturer and Merchant Exporters exporting products listed in the 410 tariff lines | 2% |
| 2 | MSME exporters of all tariff lines | 3% |
Implementation strategy and targets:
The implementation of the scheme will be carried out by the Reserve Bank of India (RBI) in collaboration with both public and non-public sector banks that offer pre and post shipment credit to exporters. To ensure effective oversight and coordination, the Directorate General of Foreign Trade (DGFT) and RBI jointly monitor the scheme through a consultative mechanism. This collaborative approach involving regulatory bodies and financial institutions aims to streamline the execution of the scheme and ensure its efficient operation in facilitating pre and post shipment credit for exporters.
Impact:
Access to competitive interest rates for pre and post shipment packing credit is vital for the export sector’s global competitiveness. A study by IIM Kashipur indicates that the Interest Equalisation Scheme has been advantageous for the country’s export growth. The scheme, designed to benefit labour-intensive industries, particularly focuses on MSME sector manufacturer exporters.
The proposal targets exports by merchants and manufacturer exporters in identified tariff lines, with a specific emphasis on MSME sector manufacturer exporters. Anticipated growth in exports from these labour-intensive sectors is expected to contribute to employment generation in the country, aligning with the scheme’s goal of supporting employment-intensive industries.
Financial Implications and benefits:
The additional allocation of Rs. 2500 Crore, in addition to the current outlay of Rs. 9538 Crore under the scheme, addresses the funding gap to continue the scheme until June 30, 2024. The estimated annual expenditure is around Rs. 2500 Crore. The scheme benefits all MSME manufacturer exporters and non-MSME exporters in identified sectors with 410 tariff lines at the four-digit level.
Introduced on April 1, 2015, the Interest Equalisation Scheme for Pre and Post Shipment Rupee Export Credit was initially valid for five years until March 31, 2020. Continuous extensions, including one during the COVID-19 pandemic, have been made, with adjustments such as fund limitations. The scheme, now capped at Rs. 10 Crore per annum per Import Export Code (IEC), targets sustainable support while excluding banks lending at rates exceeding Repo + 4% from participation, ensuring targeted and prudent implementation.
Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
