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Cabinet Greenlights Rs 2500 Crore Boost for Extended Interest Equalisation Scheme

The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi has approved an additional allocation of Rs 2500 Cr for continuation of Interest Equalisation Scheme till 30th June 2024. This would help exporters from identified sectors and all MSME manufacturer exporters to avail pre and post shipment Rupee export credit at competitive rates.

 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 ExportersRate of interest Equalisation
1Manufacturer and Merchant Exporters exporting products listed in the 410 tariff lines2%
2MSME exporters of all tariff lines3%

Implementation strategy and targets:

The scheme shall be implemented by RBI through various Public and non-Public Sector banks who provide pre and post shipment credit to the exporters. The Scheme is jointly monitored by DGFT and RBI through a consultative mechanism.

 Impact:

Availability of pre and post shipment packing credit at competitive rates is important for the exports sector in order to compete internationally. The effect of Interest Equalisation Scheme has been beneficial for the exports growth of the country as per the study conducted by IIM Kashipur. MSME sector is vital for employment generation. The scheme is primarily meant for the labour intensive sectors. The present proposal is meant for exports by merchants and manufacturer exporters of identified tariff lines and MSME Sector manufacturer exporters. Increase in exports from these employment intensive sectors and MSMEs would lead to generation of employment in the country. 

 Financial Implications:

The additional outlay of Rs 2500 Crore, over and above the current outlay of Rs 9538 Cr under the Scheme, is made available to bridge the funding gap to continue the Scheme upto 30.06.2024. The estimated annual expenditure under the Scheme is approximately Rs 2500 Crore.

 Benefits:

The intented target beneficiaries include all MSME manufacturer exporters and non-MSME exporters of certain identified sectors belonging to 410 tariff lines at four digit level.

 Details and progress of scheme if already running:

The figure of disbursement of amounts under the scheme for the last 3 years are as follow:

S.No.Financial YearBudget Allocated(in Crores)Actual Expenditure(in Crores)
12021-2234883488 (including arrears)
22022-2331183118
32023-2429322641.28(as on 30.11.2023)

Background:

Government of India had announced the Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit to eligible exporters. 

The Scheme started on April1, 2015 and was initially valid for 5 years upto 31.3.2020.  The Scheme has been continued thereafter, including one year extension during COVID, and with further extensions and fund allocations. 

Currently the Scheme provides an interest equalization benefit at the rate of 2% on pre and post shipment Rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines at 4 digit level and 3% to all MSME manufacturer exporters.

The Scheme was not fund limited and extended the benefit without any limit to all exporters. The Scheme has now been made fund limited, and benefit to individual exporters has been capped at Rs 10 Cr per annum per IEC (Import Export Code).

In addition, the banks that lend to exporters at an average rate of more than Repo + 4% would be debarred under the Scheme.

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