WHAT IS IT?

The scheme (earlier called Interest Subvention Scheme) was announced by the government in November 2018 for all exports of MSME and 416 tariff lines. The scheme covers mostly labour intensive and employment generating sectors like processed agriculture/food items, handicrafts, readymade garments, glass and glassware, medical and scientific instruments, and auto components/parts, among others.

  • The Cabinet Committee on Economic Affairs, has given its approval to the proposal of the Department of Commerce for including merchant exporters under the Interest Equalisation Scheme (IES) for Pre and Post Shipment Rupee Export Credit by allowing them interest equalisation rate of 3% on such credit for export of products covered under 416 tariff lines identified under the scheme.
  • These products are largely in MSME/ labour intensive sectors such as Agriculture, Textiles, Leather, Handicraft, machinery, etc
  • The proposal will entail benefits of around Rs 600 crore to exporters on interest equalisation, for the remaining period of the scheme.

HOW INCLUSION OF MERCHANT EXPORTERS WILL HELP?

  • Inclusion of merchant exporters in the scheme is expected to make them more competitive, encouraging them to exports more products manufactured by MSMEs adding to country’s exports.
  • Additional exports by them will increase production by MSME giving a fillip to employment generation as MSME are generally in the employment intensive sectors.
  • Merchant exporters were hitherto not covered under the scheme.
  • Merchant exporters play an important role in finding overseas markets, getting export orders, communicating to MSME manufacturers the current preferences, trends and demand for products in international export markets.
  • Merchant exporters also play a pivotal role in exports of MSME manufacturers as MSME manufacturers export significant quantity of products through merchant exporters.
  • High cost of credit equally impact their competitiveness also as they factor the high interest costs in their export costing.