Interest subsidy, ECGC scheme extended till March 2010 | business | Hindustan Times
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Interest subsidy, ECGC scheme extended till March 2010

Providing relief to exporters hit by the global meltdown, the government on Monday extended the time period for two per cent interest subsidy and insurance cover up to March 2010, besides raising the market development assistance allocation.

business Updated: Jul 06, 2009 15:25 IST

Providing relief to exporters hit by the global meltdown, the government on Monday extended the time period for two per cent interest subsidy and insurance cover up to March 2010, besides raising the market development assistance allocation.

The interest subvention on pre-shipment credit for seven sectors, including handlooms, handicrafts, carpets, leather, gems and jewellery, marine products as also the small and medium exporters will now be available till March 31, 2010, as announced in the Union Budget for 2009-10.

"Our exporters by virtue of their close links to the external sector have borne the brunt of the global economic crisis. It is therefore, appropriate that we continue to provide all possible assistance to our exporters to help them overcome the short term disadvantages," Finance Minister Pranab Mukherjee said in his Budget speech.

The scheme was to end in September this year.

The allocation for Market Development Assistance scheme has been enhanced for the current fiscal by 148 per cent over 2008-09 to Rs 124 crore.

The adjustment assistance scheme of the Export Credit Guarantee Corporation (ECGC) which covers 95 per cent of the badly hit sectors was extended till March 2010.

With the US and several countries in the Europe in the grip of recession, exporters are facing payment defaults.

The government had earlier announced Rs 350 crore scheme for the Export Credit Guarantee Corporation (ECGC), which expires on June 30.

ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services. It also guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.

The apex body of the sector, Federation of Indian Export Organisations (FIEO) has hailed the budget.

"We welcome the budget, steps like abolition of fringe benefit tax, tax holidays for EOUs and STPIs, interest subsidy for one more year are welcome steps," FIEO President A Sakthivel said.

"I propose to to extend the interest subvention beyond the current deadline of September 2009 to March 31, 2010." Mukherjee said.

With a view to insulate the employment-oriented sectors like handlooms, handicrafts, carpets, leather gens and jewellery and marine products, the government in its interim budget for 2009-10 had extended the period for concessional finance to exporters till September.

After registering a handsome growth rate of over 30 per cent in the first half of the current fiscal, India's exports entered the negative zone in October 2008 and dipped by 12.1 per cent. In the previous fiscal ,the overseas shipment has grew barely by 3.4 per cent to USD 168.7 billion.

Mukherjee further said to support the Micro, Small and Medium Enterprises sector, which was affected by the slowdown in exports, the government will facilitate the flow of credit at reasonable rates, by providing a special fund out of Rural Infrastructure Development Fund to Small Industries Development Bank.

"This fund of Rs 40,000 crore will incentivise banks and state finance corporations to lend micro and small enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs during the current financial year," he said.

Fringe benefit tax has been perceived as imposing considerable compliance burden, the FM said. "Empathising with these sentiments, I propose to abolish the fringe benefit tax."