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.

The operational instructions of the scheme would be issued by RBI.

Financial implication of the proposed scheme is estimated to be in the range of ₹ 2500 crore to ₹ 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 ₹ 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

Interest Equalisation Scheme extends export credit interest support to MSME and selected tariff lines, funded and administered via revolving reimbursements. An Interest Equalisation Scheme offers a 3% interest concession on pre and post shipment rupee export credit for five years from 1 April 2015, available to MSME exports and exporters of 416 specified tariff lines but not to merchant exporters. Funding is to come from Department of Commerce allocations transitioning from non plan to plan funds, with the Ministry placing short term requirements with the central bank and monthly reimbursements via a revolving fund; the central bank will issue operational instructions and a three year impact study will be undertaken.