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Interest Equalisation Scheme on Pre & Post Shipment Rupee Export Credit with effect from 1st April, 2015 for five years

The RBI has extended the Interest Equalization Scheme for exporters till June 30, 2021

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has given its approval for Interest Equalisation Scheme (earlier called Interest Subvention Scheme) on Pre & Post Shipment Rupee Export Credit with effect from 1st April, 2015 for five years. The scheme will be evaluated after three years.

The following are the features of the Interest Equalisation Scheme:

(i)       The rate of interest equalisation would be 3 percent. The scheme would be available to all exports of MSME and 416 tariff lines. Scheme would not be available to merchant exporters.

(ii)        The duration of the scheme would be five years with effect from 1.4.2015.

(iii)      The scheme would be funded from the funds available with Department of Commerce under non-plan during 2015-16 and the restructured scheme would be funded from plan side from 2016-17 onwards,

(iv)     Ministry of Commerce & Industry may place funds in advance with RBI for requirement of one month and reimbursement can be made on a monthly basis through a revolving fund system,

(v)      On  completion  of three years of operation  of the  scheme,   Department of Commerce may initiate a study on impact of the scheme on export promotion and its further continuation. The study may be done through one of the IIMs.

Financial implication of the proposed scheme is estimated to be in the range of Rs. 2500 crore to Rs. 2700 crore per year. However, the actual financial implication would depend on the level of exports and the claims filed by the exporters with the banks. Funds to the tune of Rs. 1625 crore under Non-plan Head of account are available under Demand of Grants for 2015-2016, which would be made available to RBI during 2015-16.  

The scheme will help the identified export sectors to be internationally competitive and achieve higher level of export performance.

The scheme covers mostly labour intensive and employment generating sectors   like   processed   agriculture/food   items,   handicrafts,   handmade   carpet (including silk), handloom products, coir and coir manufactures, jute raw and yarn and other jute manufactures, readymade garments and made ups covered under Chapter 61-63, fabrics of all types, toys, sports goods, paper and stationary, Cosmetics and Toiletries, Leather Goods and footwear, Ceramics and Allied  Products, Glass and Glassware, Medical and Scientific Instruments, Optical Frames, Lenses, Sunglasses Etc., Auto Components/Parts, Bicycle & Parts, Articles of Iron or Steel (Notified lines), Misc. Articles of base metals (Notified lines), Industrial Machinery, Electrical and Engineering items, 1C Engine, Machine tools, Parts (Notified lines), Electrical Machinery and Equipment (Notified lines), Telecom Instruments (Notified lines) and all items manufactured by SMEs other than those covered above. 

The list of 416 tariff lines is given below:  

S.No.

 

Sector

 

Coverage

 

No of HS4 lines

 

1

 

Process agriculture/Food items

 

All lines

 

22

 

2

 

Handicraft

 

All lines

 

37

 

3

 

Carpet (Excl. Silk) Handmade

 

All lines

 

5

 

4

 

Handloom Products

 

All lines

 

2

 

5

 

Coir & Coir Manufactures

 

All lines

 

5

 

6

 

Jute Raw, Yarn

 

All lines

 

2

 

7

 

Other Jute Manufactures

 

All lines

 

1

 

8

 

Readymade Garments and Made ups ( Ch 61-63)

 

All lines 42

 

9

 

Fabric of all types

 

All lines

 

33

 

10

 

Toys

 

All lines

 

1

 

11

 

Sports Goods

 

All lines

 

8

 

12

 

Paper, Stationary

 

All lines

 

8

 

13

 

Cosmetics and Toiletries

 

All lines

 

8

 

14

 

Leather Goods and footwear

 

All lines

 

7

 

15

 

Ceramics and Allied Products

 

All lines

 

12

 

16

 

Glass and Glassware

 

All lines

 

17

 

17

 

Medical and Scientific Instruments ,

 

All lines

 

15

 

18

 

Optical Frames, Lenses, Sunglasses Etc

 

All lines

 

4

 

19

 

Auto Components/Parts

 

All lines

 

6

 

20

 

Bicycle & Parts

 

All lines

 

3

 

 
21

 

Articles of Iron or Steel

 

Notified lines

 

20

 

 
22

 

Misc. Articles of base metals

 

Notified lines

 

10

 

 
23

 

Industrial Machinery, Electrical and Engineering items, 1C Engine, Machine tools, Parts

 

Notified lines

 

141

 

 
24

 

Electrical Machinery and Equipment

 

Notified lines

 

1

 

 
25

 

Telecom Instruments

 

Notified lines

 

6

 

 
26

 

All items manufactured by SMEs other than those covered above

 

All lines

 

 

 

 
 

 

Grand Total

 

 

 

416

 

 

The RBI has extended the Interest Equalization Scheme for exporters for three more months till June 30, 2021. The extension takes effect from April 1, 2021, and ends on June 30, 2021, covering a period of three months. Consequently, the extant operational instructions issued by the Reserve Bank under the scheme shall continue to remain in force up to June 30, 2021.

The Commerce Ministry had been trying to ensure that the interest equalization scheme, which lapsed on March 31, got extended by the RBI, to help Indian exporters struggling to manage their business in the uncertain global market, amid the COVID-19 pandemic.

The scheme, announced in April 2015, gives subsidy on interest provided on pre-and post-shipment export credit varying between 3% and 5% to exporters.

The banks give credit at lower interest rates to exporters and the differential amount is later refunded by the government. Besides, the MSME exporters of all items, exporters of 416 identified products are also eligible to avail of the benefit.

Operational instructions for the Scheme are  : DBR.Dir.BC.No.62/04.02.001/2015-16 dated December 4, 2015; DCBR.CO.SCB.Cir.No.1/13.05.000/2015-16 dated February 11, 2016, DBR.Dir.BC.No.09/04.02.001/2018-19 dated November 29, 2018 and DBR.Dir.BC.No.22/04.02.001/2018-19 dated January 11, 2019.

 

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