Cabinet Approves Additional Allocation of Rs 2500 Crore for Continuation of Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit Till 30.06.2024
In a significant move aimed at supporting the country’s export sector, the Union Cabinet, chaired by Prime Minister Shri Narendra Modi, has given its nod to an additional allocation of Rs 2500 Crore for the continuation of the Interest Equalisation Scheme until June 30, 2024. This financial boost is expected to facilitate exporters, particularly those from identified sectors and Micro, Small, and Medium Enterprises (MSME) engaged in manufacturing for availing pre and post shipment Rupee export credit at competitive interest rates.
Details of the Scheme:
The extension of the Interest Equalisation Scheme until June 30, 2024, will benefit manufacturer and merchant exporters dealing with 410 identified tariff lines. Additionally, all MSME manufacturer exporters, irrespective of the tariff line, will be eligible for the scheme.
The interest equalisation rates under the scheme are as follows:
- Manufacturer and Merchant Exporters exporting products listed in the 410 tariff lines: 2%
- MSME exporters of all tariff lines: 3%
Implementation Strategy and Targets:
The Reserve Bank of India (RBI) will oversee the implementation of the scheme through various Public and non-Public Sector banks responsible for providing pre and post shipment credit to exporters. The Directorate General of Foreign Trade (DGFT) and RBI will jointly monitor the scheme through a consultative mechanism.
Impact and Benefits:
The availability of pre and post shipment packing credit at competitive rates is crucial for the export sector’s international competitiveness. The Interest Equalisation Scheme has been proven beneficial for the country’s export growth, as evidenced by a study conducted by IIM Kashipur. The scheme primarily targets labor-intensive sectors, with the MSME sector playing a vital role in employment generation. The proposal aims to boost exports from these sectors, leading to increased employment opportunities in the country.
Financial Implications:
The additional allocation of Rs 2500 Crore, coupled with the current outlay of Rs 9538 Crore under the scheme, aims to bridge the funding gap and sustain the scheme until June 30, 2024. The estimated annual expenditure under the scheme is approximately Rs 2500 Crore.
Scheme Progress and Disbursement:
The figures for disbursement under the scheme in the last three years are as follows:
- 2021-22:
- Budget Allocated: Rs 3488 Crore
- Actual Expenditure: Rs 3488 Crore (including arrears)
- 2022-23:
- Budget Allocated: Rs 3118 Crore
- Actual Expenditure: Rs 3118 Crore
- 2023-24:
- Budget Allocated: Rs 2932 Crore
- Actual Expenditure: Rs 2641.28 Crore (as of 30.11.2023)
Background:
The Government of India initiated the Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit for eligible exporters on April 1, 2015. Initially valid for five years until March 31, 2020, the scheme has been extended, including a one-year extension during the COVID-19 pandemic, with subsequent extensions and fund allocations. The scheme was initially unlimited but has now been made fund-limited. Individual exporters are capped at a benefit of Rs 10 Crore per annum per Import Export Code (IEC). Banks lending to exporters at rates exceeding Repo + 4% will be debarred under the scheme.
