Responding to a long-standing demand from merchant exporters, the government has decided to make them eligible for its interest equalisation scheme for pre- and post-shipment export credit that will bring down borrowing costs considerably.
The Cabinet Committee on Economic Affairs, on Wednesday, gave its approval for the proposal of the Department of Commerce to include merchant exporters under the scheme by allowing them interest equalisation rate of 3 per cent on credit for export of 416 tariff lines identified under the scheme, according to an official release.
This means that merchant exporters will now be eligible for credit from banks at 3 per cent lower interest rates and the banks will, in turn, be compensated by the Centre for it. So far, only manufacturing exporters were eligible for the scheme.
“The proposal will entail benefits of around ₹600 crore to exporters on interest equalisation for the remaining period of the scheme,” an official statement said.
Merchant exporters play an important role in finding overseas markets, getting export orders, and communicating to MSME manufacturers the current preferences, trends and demand for products in international export markets, the statement added.
The extension of interest equalisation benefit to merchant exporters will help in increasing the country’s exports, said Ganesh Kumar Gupta, President, FIEO. “Merchant exporters contribute to about 35 per cent of the country’s exports and high cost of credit equally blunts their competitive edge. The support is most timely as interest rates are moving northward in the country and the 3 per cent subsidy will reduce their cost of operation significantly,” Kumar said.
The products covered under the interest subvention scheme are largely in the MSME/labour intensive sectors such as agriculture, textiles, leather, handicraft and machinery.
“Inclusion of merchant exporters in the scheme is expected to make them more competitive, encouraging them to export more products manufactured by MSMEs adding to the country’s exports. Additional exports by them will increase production by MSME giving a fillip to employment generation as MSME are generally in the employment intensive sectors,” the statement added.