MSME exports: FIEO seeks 5-year extension of interest equalisation scheme – SME News

Exporters body Federation of Indian Export Organisations (FIEO) has urged the government to extend the interest equalisation scheme further for at least five years from December 31, 2024, to support exporters amid the decline in merchandise exports of the country. FIEO President Ashwani Kumar said there is an urgent need to take steps on the liquidity front with deeper interest subvention support and extension of interest equalisation scheme for at least 5 years, creating a predictable business environment for the exporters.

Further, demanding a cap of Rs 10 crore for all MSMEs and 410 tariff lines for a period of five years, Kumar said in a statement that the imposition of cap of Rs 50 lakh per company in the scheme has hit many MSMEs and they are unable to decide on order with non-availability of further subvention.

In a trade notice in September this year, the government had said that fiscal benefits for each MSME on aggregate will be restricted to Rs 50 lakh for 2024-25 till December 2024 and that MSME manufacturer exporters who have already availed equalisation benefits of Rs 50 lakh or more in 2024-25 till September 30 will not be eligible for any further benefit in the extended period, that is, till December 2024. 

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The interest equalisation scheme was launched in April 2015, initially for five years but was continued later with multiple extensions. It offers an interest equalisation benefit at the rate of 2 per cent on pre and post-shipment rupee export credit to merchant and manufacturer exporters of the identified 410 tariff lines and 3 per cent to all MSME manufacturer exporters. The rebate offered by banks is reimbursed by the government.   

India’s exports had contracted in November by 4.85 per cent year-on-year to $32.11 billion after a double-digit growth in October. Moreover, the trade deficit had also widened to an all-time high of $37.84 billion amid record growth in gold imports. 

Kumar said the ongoing international trade disruptions along with the volatility in crude and metal prices have also played key role, apart from global economic uncertainties, in the declining value of exports to some extent.

Moreover, the rising tensions between Israel-Iran have continuously led to logistical challenges with regard to international trade getting impacted as most of India’s trade to Europe, Africa, CIS and the Gulf region is happening through the Red Sea route or the Gulf region prompting buyers to have little large inventories, he added.

MSME exports during the eight-month (April-November) period in the current financial year amounted to Rs 12.39 lakh crore, surpassing Rs 8.55 lakh crore worth of MSME exports recorded in the entire FY23 while export value in FY24 increased to Rs 14.05 lakh crore.

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