Export finance subsidy still overdue

Government yet to pay Rs 1100 crore to banks

The United Progressive Alliance –II government which runs a $ 1.85 trillion economy, is yet to pay back a paltry sum of Rs 1100 crore to the banks on account of subsidy for export credit. The entire amount of the current financial year remains due till date reflecting the way the government treat its own schemes.

 

The export scheme was launched by the government and several sectors like textiles, readymade garments, leather products, handicrafts, engineering products, gets the benefit of interest rate subvention of 2%. Banks are free to determine the interest rate but the rate cannot be less than the base rate of individual bank.

 

Though RBI initially opposed the government’s proposal that banks should pass on the subsidy benefit upfront, but later toed the finance ministry’s line. Banks claim reimbursement from RBI on quarterly basis. 

 

“Banks are required to completely pass on the benefit of interest subvention, as applicable, to the eligible exporters upfront and submit the claims to RBI for reimbursement duly certified by the external auditor. The subvention would be reimbursed by RBI on the basis of quarterly claims submitted by the banks in the prescribed format,”  RBI’s master circular on rupee and foreign currency export credit said.

 

According to bankers, till now, not a single penny of the Rs 1,100 – which is due for the current financial has been paid which is a reflection of the state of the affairs of the government’s finances. 

 

The government is squeezing its expenditure to meet the fiscal deficit target of 4.8% of GDP for the current financial year as compared to 4.9% in the previous financial year. 

 

The fiscal deficit in the April-November period reached 94% of the targeted budgetary estimate of Rs 5.42 lakh crore, raising concerns that the country may overshoot its target of containing the deficit at 4.8%. The fiscal situation of the country remains gloomy due to high subsidy and challenges in revenue mop up amid a slowing economy. In addition, the sharp rupee depreciation during the April-August period, though it has recovered from September – will put pressure on the subsidy bill. 

 

The interim Budget for 2014-15 is scheduled to be presented in Parliament on February 17. 

 

However, bankers are amazed by the way in which the government treat its own subsidy schemes. In several forums, the finance ministry prods the bankers to expedite loans to these sector so that exports could be boosted. However, now bankers say, they have become reluctant to lend to the sector.

 

Till the end of the end of the last financial year, the government has spent Rs 5,000 crore as subsidy for export credit.