Government Extends Export Credit Scheme for MSMEs Until August

The Commerce Ministry has announced an extension of the pre- and post-shipment rupee export credit under the Interest Equalization Scheme (IES) for Micro, Small, and Medium Enterprises (MSME) exporters until August. The scheme, initially set to expire on Sunday, has been extended for an additional two months with a total outlay capped at Rs 750 crore, as per a notification from the Directorate General of Foreign Trade (DGFT).

This extension is limited to MSME exporters and will operate under the same terms and conditions as the current scheme, as the DGFT notification stated.

Ashwani Kumar, president of the Federation of Indian Export Organizations (FIEO), voiced concerns regarding the impact on exporters of products under 410 tariff lines. He noted that non-MSME manufacturers and merchant exporters might face challenges, potentially affecting exports of labor-intensive products that have already seen a decline in market share. Exports from some large companies could also be impacted, Kumar added.

Exporters had previously urged the government to extend the scheme, highlighting the challenges faced by small exporters due to high interest rates and declining exports. The IES, launched nearly a decade ago, aims to alleviate stress among exporters, particularly those in labor-intensive industries and MSMEs, by offering loans at reduced interest rates. The government compensates the lenders for the difference.

Currently, the interest equalization rate is 2 percent for certain manufacturers and merchant exporters covering 410 identified products, and 3 percent for MSME manufacturers. Despite a budgetary allocation of Rs 9,538 crore, the scheme’s funds were insufficient to cover expenses until March 31. The government subsequently increased the outlay by Rs 2,500 crore earlier this year.

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