In a move aimed at supporting the country’s export sector, the Commerce Ministry has announced a two-month extension of the Interest Equalisation Scheme (IES) for Micro, Small & Medium Enterprises (MSME) exporters.
The scheme, which was set to expire on Sunday, will now continue until August, providing pre and post-shipment rupee export credit to eligible businesses.
The Directorate General of Foreign Trade (DGFT) issued a notification stating that the extension will apply exclusively to MSME exporters, with a total outlay capped at Rs 750 crore for the extended period. The terms and conditions of the scheme will remain unchanged during this time.
The IES, introduced nearly a decade ago, aims to alleviate financial stress on exporters, particularly those in labour-intensive industries and the MSME sector.
Under the scheme, banks offer loans to exporters at reduced interest rates, with the government compensating the lenders for the difference.
Currently, the interest equalisation rate stands at 2 per cent for certain manufacturers and merchant exporters of 410 identified products, while MSME manufacturers benefit from a 3 per cent rate.
However, the extension has received mixed reactions from the industry. Ashwani Kumar, president of the Federation of Indian Export Organisations (FIEO), expressed disappointment on behalf of exporters dealing with products under 410 tariff lines who are not classified as manufacturer MSMEs.
Kumar cautioned, “This may affect exports of labour-intensive products, which have lost market share in the past few years, as many merchant exporters play a pivotal role in exporting such products. Exports from some large companies may also be impacted.”
The decision comes after exporters had urged the government to extend the scheme, citing it as a crucial lifeline for small exporters struggling with high interest rates and declining exports.
Earlier this year, the government had allocated a budgetary outlay of Rs 9,538 crore to the scheme. However, this amount proved insufficient to cover the scheme until the end of the fiscal year on March 31.
In response, an additional Rs 2,500 crore was provided to support the program.
As the global economic landscape remains uncertain, the extension of the IES for MSMEs is seen as a strategic move to bolster India’s export competitiveness.
However, the exclusion of non-MSME exporters from this extension has raised concerns about potential impacts on certain sectors of the export industry.
