The revamped interest equalisation scheme for exporters may be extended only to value added products and exclude non value-added items, raw materials and cereals such as cotton yarn and rice, sources have said.

“The list of interest equalisation scheme beneficiaries is being re-jigged. This follows directions from the Finance Ministry to the Commerce Department to re-work the scheme to ensure it is targeted to promote manufacturing and export of labour-intensive value added items and high-tech products,” the source added.

The interest equalisation scheme, under which beneficiaries are extended export credit by banks at a subsidised interest rate, was first implemented in April 2015 for five years. It covered non-MSME exporters of about 410 identified products and all exporters from the MSME sector. 

The scheme was subsequently extended for limited periods of time and the last extension, which was only for MSME exporters, lapsed on December 31, 2024.

Revamped scheme

“It is being hoped that once the list of exported items eligible for interest subvention from the non-MSME sector is re-worked, the revamped scheme will be announced for all. The non-MSME exporters will be covered for all items. The relaunch of the revamped scheme may happen in this year’s Budget,” the source said.

The interest equalisation rates, which were earlier lowered to 2 per cent for non-MSME exporters and 3 per cent for MSME exporters, are expected to remain unchanged, the source added. This is because the Finance Ministry has budgetary constraints and may also place a limit on the benefit amount.

The initial list of 410 items covered under the scheme included items such as readymade garments, toys, sports goods, fabrics, handicrafts, medical and scientific instruments, auto components, bicycles and parts, leather goods, footwear, cosmetics and processed agriculture and food items.

“A number of items in the list of 410 products that qualify as value-added products may be retained while those that do not may be dropped. Some new items may be included such as electronics and pharmaceuticals where the government is looking for growth,” the source added.

Under the interest equalisation scheme, the banks are compensated by the government for the subsidised rate of credit offered to beneficiaries.

Published on January 13, 2025