Suspense over interest subvention scheme more damaging, say exporters

Himanshu Vatsa | The Dollar Business

The delay over the implementation of interest subvention scheme, which seeks rebate in interest rate on bank loans for exporters, is hampering India’s overseas trade severely, say exporters.

The previous UPA government had introduced the scheme under which exporters of certain categories used to get up to 3% rebate on interest rates. The scheme which was aimed improving liquidity and competitiveness of exporters in the international market was discontinued in April last year.

The present government has also assured that the scheme will be re-launched. Traders engaged in overseas trade have been demanding immediate implementation of the scheme with retrospective effect, i.e, from April 2014.

“The decision on re-introduction of the scheme has been hanging in balance since April 2014. We have already given our suggestions to the government on the matter six months ago. Still, there is no clarity. The government is just giving us hope and assurances. This situation is more damaging because exporters keep every aspect in mind while negotiating orders from abroad,” Tilak Raj Manaktala, President of Delhi Exporters Association, told The Dollar Business.

Exporters say that they deserve some rebate on loan interest as an additional support to compensate the loss due to increased transaction cost within the country.

He said the government should at least allow refunds in term of duty drawback, CENVAT and services tax etc. within 15 days. At present, exporters have to wait for around a year for such refunds. The amount is refunded within 90 days of filing application but one can apply for refund only after exporting the goods.

“The government is earning by collecting these taxes from exporters in advance. Besides, shipping cost is the biggest burden for us. Apart from paying shipping agents, exporters are forced to pay penalty for delay,” Manaktala said, adding that he has written a letter to the Shipping Ministry last week and the response is awaited.

According to the Federation of Indian Export Organisations (FIEO), delaying decision gives exporters an impression that the government is not at all serious about the issue.

“Though we have been given assured that the scheme will be reintroduced, the announcement has been getting postponed since June first week. This is hurting the sentiment of exporters. If the government is really serious about export, they should not delay such thing. We have written to the Prime Minister on the matter but yet to get any response,” S C Ralhan, President of FIEO, told The Dollar Business.

Ralhan said that the scheme should cover all exporters and not only a few sectors of MSME (Micro, Small and Medium Enterprises).

India’s exports have been declining since six months. According to the latest data, the country’s export contracted to $22.28 billion in June, registering 15.82% decline from the level of $26.47 billion in the same month a year ago.

August 10, 2015 | 2:41pm IST.