 "FIEO urges Centre to extend interest subvention scheme for 5 years")
Apex exporters body FIEO on Tuesday urged the government to extend the interest subvention scheme for five years to help increase credit flow in the sector in order to boost the country's shipments, which registered a steepest decline in 13-month falling 9.3 per cent in August to $34.71 billion.
Earlier this month, the government extended the interest equalisation/subvention scheme, which provides interest benefits, on pre- and post-shipment rupee export credit for one more month till September 30.
"The scheme will end on September 30. We have requested for it to be extended for five years. If there is no interest equalization scheme, then we will lose some markets and some orders," Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai told reporters here.
The scheme helps exporters from identified sectors and all MSME (micro, small and medium enterprise) manufacturer exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds. Exporters get subsidies under the Interest Equalisation Scheme for pre- and post-shipment rupee export credit.
The scheme was started on April 1, 2015, and was initially valid for five years up to March 31, 2020. It has been continued thereafter, including a one-year extension during COVID-19, and with further extensions and fund allocations.
The scheme is fund-limited, and benefits to individual exporters are capped at Rs 10 crore per annum per IEC (Import Export Code).
FIEO President Ashwani Kumar said that over 50 per cent of the production in India is done by MSMEs, which are facing financing problems.
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The organisation has earlier stated that the declining bank credit to exporters will hurt the sector.
While exports grew by 15 per cent in the rupee terms between 2021-22 and 2023-24, the outstanding credit in March 2024 dropped by 5 per cent over the same month in 2022, according to exporters.
"Liquidity is a big concern for Indian exports. Demand for credit has increased because of an exponential rise in sea and air freight, and longer voyage time because of which payments happen late. The gap between exports and export credit is widening," Sahai added.
Meanwhile, FIEO signed a memorandum of understanding (MoU) with Stenn, an online platform for financing small and medium-sized enterprises (SMEs) engaged in global trade.
The pact was aimed at providing financial solutions that would address liquidity challenges and enhance the competitiveness of Indian businesses especially SMEs in the global marketplace.
"This collaboration seeks to drive export growth by equipping SMEs with the necessary financial tools to scale their operations and seize international opportunities," Kumar said.
Kumar expressed confidence that the MoU will pave the way for addressing the working capital requirements of exports focussing on post-shipment.