New Delhi: Concerned over continuous decline in exports, government on Wednesday announced 3 percent interest subsidy scheme for exporters which will have a financial implication of about Rs 2,700 crore.


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The decision to help boost overseas shipments was taken at a meeting of Cabinet Committee on Economic Affairs headed by Prime Minister Narendra Modi.


Also Read: Interest subsidy scheme to boost shipments: Exporters


The CCEA has given its approval for "Interest Equalisation Scheme (earlier called Interest Subvention Scheme) on Pre and Post Shipment Rupee Export Credit with effect from 1st April, 2015 for five years", an official statement said.


The rate of interest equalisation would be 3 percent, it said, adding that it will be evaluated after three years.


Financial implication of the proposed scheme is estimated to be in the range of Rs 2,500 crore to Rs 2,700 crore per year, it said.


However, it added that the actual implication would depend on the level of exports and the claims filed by the exporters with the banks.


Funds worth Rs 1,625 crore in the non-plan head of account are available under Demand of Grants for 2015-2016 and would be made available to the Reserve Bank, it said.


The scheme would be available to all exports of Micro, Small and Medium Enterprises (MSME) and 416 tariff lines. But it would not be available to merchant exporters.


"We believe that this will give a big boost to exports particularly for the MSME sector, handicraft, agri-products and food processing," Power Minister Piyush Goyal said after the Cabinet meeting.


He said the previous government had discontinued the interest subvention scheme, which has made the country's exports uncompetitive. Under the scheme, exporters get loans at affordable rates, which helps them ship more goods to foreign markets.


India's exports remained in the negative territory for the 11th month in a row in October, registering a dip of 17.53 per cent to USD 21.35 billion due to a demand slowdown, although trade deficit showed some improvement.


The scheme would be implemented through funds available with the Department of Commerce under non-plan during 2015-16 and the restructured scheme would be funded from plan side from 2016-17 onwards.


It said that the Commerce and Industry Ministry 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.


"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," it said adding the study may be done through one of the IIMs.


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


The scheme will help the identified export sectors to be internationally competitive and achieve higher level of export performance.


It covers mostly labour intensive and employment generating sectors like processed agriculture/food items, handicrafts, handloom products, coir, jute, readymade garments, sports goods, paper and stationary, leather, medical instruments, auto components and engineering.


Talking about overall export performance, Goyal said India's performance is noteworthy given the global situation.


"India's net performance on the export front, when compared to the global scenario, where almost all countries has seen a drastic fall in exports both in volume and value, has been particularly noteworthy for which we compliment small business and industry," he said.


Sectors such as jute, spices and coffee exports are registering healthy  growth rates, he said.


In the global recessionary trends, India's exports have withstood the ground, he added.


"So overall the fall in exports, if you see in rupee terms, once you exclude the petroleum products, is barely 3 percent," he added.


Further, the minister said, a major fall in exports has been in petroleum products.


During the April-October period of the current fiscal, the largest fall in exports has been in the petroleum products sector. It declined by 52.3 percent due to fall in international oil and commodity prices.


"But this is not the fall in volumes, it is a fall in value of the petroleum products," he said.


Welcoming the extension of the interest subvention scheme, exporters body FIEO said that the move would help in making the country's exports competitive in the global market.


"It is a welcome move. It will help in giving a strong support to exporters," Federation of Indian Exports Organisation (FIEO) Director general Ajay Sahai said.