The Indian government has extended the Interest Equalisation Scheme (IES) intended to provide pre and post-shipment rupee export credit to eligible exporters by two months for the micro, small and medium enterprises (MSMEs). The scheme inaugurated on April 1, 2015, was slated to expire on June 30.
The Interest Equalisation Scheme is an initiative by the government to promote outbound shipments by providing interest benefits to exporters.
The Department of Commerce has now extended the scheme till August 31. As per media reports, the extension is not applicable for non-MSME exporters beyond June 30. This means that the claims of non-MSME exporters will not be entertained beyond this date.
As per a trade notice from the Department of Commerce dated June 28, the total outlay for the extended period stands at Rs 750 crore, and the terms of the scheme will remain the same.
On December 8, the Union Cabinet approved an additional allocation of Rs 2,500 crore for the continuation of the scheme up to June 30. At a time when the global economy is facing headwinds, the scheme helps exporters from specified sectors and all MSME manufacturer exporters to avail of rupee export credit at affordable rates. Launched in 2015, the scheme was initially valid for five years up to March 31, 2020. It was given a one-year extension during Covid-19 and more extensions and fund allocations since then.
Meanwhile, a body of exporters has written to Union Commerce and Industry Minister Piyush Goyal, expressing concerns over the extension of the IES scheme for only two months and exclusively for MSMEs, according to The Economic Times report.
Ashwani Kumar, the Federation of Indian Export Organisations (FIEO) president reportedly highlighted that the scheme has so far benefitted not only MSMEs but also merchant exporters and large manufacturing companies at a lower rate of 2% for 410 tariff lines, covering labour-intensive products.
About the Interest Equalisation Scheme (IES) for MSME Exporters:
The scheme initially launched in 2015 for five years was first extended till March 31, 2024. Now the scheme has been further extended till August 2024. The scheme is aimed to provide exporters with a cheaper source of rupee credit for pre-shipment and post-shipment activities.
The Reserve Bank of India (RBI) implements this scheme with the help of the banks. Under the scheme, eligible exporters can opt to avail upfront benefit of interest subvention from the bank. Thereafter, the amount given as a subvention in the interest rate to the exporters is reimbursed to the RBI by the Commerce Department for its onward release to the concerned Scheduled Commercial Banks and Urban Cooperative Banks.
Also Read: Digital Loans Disbursement Grew 35% To Whopping 10 Cr Loans In FY24
Eligibility criteria for IES:
- As per Foreign Trade Policy (FTP) 2015-20 Handbook of Procedures, some of the eligibility criteria to avail of benefits under the scheme include:
- The goods being exported should be manufactured by the exporter and must follow the definition of ‘manufacture’ as mentioned in the FTP.
- In the case of imported inputs, goods will be considered as originating in India only if they undergo significant processing or operation.
- Telecom products made in India are eligible for this scheme when they are exported. However, this is subject to the condition of minimum value addition as mentioned by the Department of Telecommunications.
