Cabinet Approves Additional Rs 2,500 Crore for Export Credit Subsidy Scheme

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In a move to support exporters and boost the country's economy, the Union Cabinet, led by Prime Minister Narendra Modi, has approved an additional allocation of Rs 2,500 crore for the continuation of the Interest Equalisation Scheme for pre- and post-shipment rupee export credit. This scheme provides subsidies to exporters to help them avail rupee export credit at competitive rates, particularly during challenging times in the global economy.

Extension of the Scheme

The Interest Equalisation Scheme was initially introduced on April 1, 2015, with a validity of five years until March 31, 2020. Recognizing its importance, the scheme has been extended several times, including a one-year extension during the COVID-19 pandemic. The latest extension, approved by the Union Cabinet, ensures the continuation of the scheme until June 30, 2024.

Subsidy Rates and Eligibility

Under the Interest Equalisation Scheme, manufacturer and merchant exporters of specified 410 products are eligible for a 2% subsidy on pre- and post-shipment rupee export credit. Additionally, all MSME manufacturer exporters receive a 3% subsidy. This support aims to enhance the competitiveness of Indian exports in the international market.

Funding and Implementation

The scheme was initially designed without any funding limit, providing benefits to all exporters without restrictions. However, to ensure its sustainability, the scheme has now been made fund limited, with a cap of Rs 10 crore per annum per IEC Import Export Code for individual exporters. Furthermore, banks that lend to exporters at an average rate exceeding Repo +4% will be debarred from participating in the scheme.

The Reserve Bank of India (RBI) is responsible for implementing the scheme through various public and non-public sector banks that offer pre- and post-shipment credit to exporters. The Directorate General of Foreign Trade (DGFT) and RBI jointly monitor the scheme through a consultative mechanism to ensure its effective implementation.

Disbursements and Utilization

As of November 30, 2023, the government has disbursed Rs 2641.28 crore under the scheme during the current fiscal year, against the allocated budget of Rs 2932 crore. In the previous fiscal year (2022-23), Rs 3118 crore was disbursed, while in 2021-22, the disbursement amounted to Rs 3488 crore. These figures highlight the significant utilization of the scheme by exporters.

The Union Cabinet's approval of an additional allocation for the Interest Equalisation Scheme demonstrates the government's commitment to supporting exporters and promoting economic growth. By providing subsidies on export credit, the scheme helps Indian exporters compete effectively in the global market, thereby contributing to the country's overall export performance and economic prosperity.