FIEO Urges Government to Extend Interest Equalisation Scheme for Exporters by 5 Years

New Delhi, Sep 25 (KNN) The Federation of Indian Export Organisations (FIEO) has called on the government to extend the Interest Equalisation Scheme, or loan subsidy for exporters, by another five years.

The scheme, which has seen multiple extensions, is slated to end on September 30, 2024. With global demand remaining subdued and geo-political conflicts disrupting trade, FIEO believes that the extension will offer much-needed support to India’s struggling exporters.

Ajay Sahai, Director General of FIEO, addressed the media on the sidelines of an industry event, where he underscored the critical importance of the scheme.

“Without the interest equalisation scheme, some Indian exporters may not be able to fulfill overseas shipment demands. Losing this financial support could lead to a loss of both markets and orders,” Sahai warned.

The Interest Equalisation Scheme was first introduced in April 2015 to help exporters offset high domestic credit costs. Initially, the scheme provided a 3 per cent interest subsidy for labour-intensive and MSME sectors.

Over time, it was expanded: in November 2018, the subsidy was increased to 5 per cent for MSMEs, and merchant exporters were brought under its ambit in January 2019.

The scheme has since played a vital role in ensuring competitiveness for Indian exporters, who face a significantly higher credit cost compared to countries like Japan, China, South Korea, and Singapore.

"Given India's bank rate of 6.5 per cent, local credit costs are 5-6 per cent higher than major export-oriented nations. This disparity poses a challenge for our exporters to compete globally,” Sahai added.

FIEO President Ashwani Kumar highlighted another concern for exporters—the rising cost of transportation due to ongoing disruptions in the Red Sea.

These issues, he noted, are compounding existing financial challenges for exporters and further reinforce the need for the government's intervention.

In a bid to support small and medium-sized enterprises (SMEs) engaged in international trade, FIEO also signed a collaboration agreement with trade finance firm Stenn.

Noel Hillman, Stenn’s Chief Commercial Officer, remarked, "Our partnership with FIEO is a commitment to help Indian exporters grow globally. By offering flexible financing solutions and mitigating payment risks, we aim to enable SMEs to scale faster and compete with larger players."

The export body remains hopeful that the government will announce the extension of the scheme, ensuring stability for India's export sector amidst global uncertainties.

(KNN Bureau)