The Government of India has recently extended the Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit, according to Trade Notice No. 07/2024-2025 dated June 28, 2024, and Trade Notice No. 08/2024-2025 dated July 10, 2024. This extension of the scheme is applicable from July 1, 2024, and will remain in effect until August 31, 2024. The extension aims to support exporters by providing interest rate subsidies on their credit facilities, thereby making their exports more competitive in the global market.
The Interest Equalization Scheme was initially introduced to reduce the cost of credit for exporters and has been a critical tool in promoting Indian exports. By providing an interest subsidy, the scheme helps exporters manage their working capital requirements more effectively, especially in a challenging global economic environment.
However, with this latest extension, the Government has introduced significant modifications to the eligibility criteria and the cap on the subvention amount. As of July 1, 2024, only MSME (Micro, Small, and Medium Enterprises) Manufacturer exporters are eligible to benefit from the scheme. This change excludes non-MSME exporters from availing the scheme’s benefits, making the scheme more focused on supporting smaller, domestic manufacturers. This shift reflects the Government’s broader strategy of promoting and sustaining the growth of MSMEs, which are considered the backbone of the Indian economy due to their substantial contribution to employment and industrial output.
In addition to the change in eligibility, the Government has imposed a cap on the amount of interest equalization that can be claimed. The subsidy is now limited to ₹1.66 Crore per Importer-Exporter Code (IEC) for the extended period of the scheme. This cap is intended to ensure that the benefits of the scheme are distributed more equitably among eligible exporters, particularly the smaller players who may require more support.
The other provisions of the scheme, as detailed in the Reserve Bank of India’s circular No. DOR.STR.REC. 78/04.02.001/2023-24 dated February 22, 2024, remain unchanged. These provisions continue to govern the operational aspects of the scheme, ensuring that the scheme functions smoothly and benefits the intended recipients.
In conclusion, while the extension of the Interest Equalization Scheme provides continued support to MSME Manufacturer exporters, the new restrictions and caps reflect the Government’s intent to target the scheme more precisely, ensuring that the benefits reach the most needy sectors of the export community. Exporters must take note of these changes and align their strategies accordingly to fully leverage the scheme’s benefits during the extended period.
