NEW DELHI: The government on Saturday relaxed priority sector lending norms to provide additional export credit of up to Rs 68,000 crore and announced a Rs 50,000 crore scheme to reimburse taxes and duties paid by exporters with an aim to boost dwindling outward shipments.
In addition, it said the insurance cover under the Export Credit Insurance Scheme (ECIS) has been enhanced, which will provide banks more comfort to give loans to exporters, especially those in the MSME sector.
Announcing the measures, Finance Minister Nirmala Sitharaman said exporters need "handholding" and the steps will give them an additional advantage at a time when the rupee has depreciated against the US dollar.
She said scheme for Remission of Duties or Taxes on Export Product (RoDTEP) will replace MEIS (Merchandise Exports from India Scheme) and expanded to all segments in addition to textiles.
The RoDTEP scheme will be implemented from January 1.
"Textiles and all other sectors which currently enjoy incentives up to 2 per cent over MEIS will transit into RoDTEP from January 1, 2020," the minister said. In effect, RoDTEP will more than adequately incentivise exporters than existing schemes put together," she added.
The move assumes significance as MEIS was not in compliance with global trade rules.
The US has already filed a complaint against this and similar other export promotion schemes being given by India in the WTO.
Under the World Trade Organisation (WTO) rules, certain duties like state taxes on power, oil, water, and education cess are allowed to be refunded.
Meanwhile, Commerce and Industry Minister Piyush Goyal thanked the Prime Minister and the Finance Minister for the measures to prop up the export sector.
"These will help make Indian exports competitive & especially benefit MSME exporters with a new scheme for reimbursing taxes, reduced insurance cost & ease of doing business," he said in a tweet.
Sitharaman announced another important measure so that exporters can exploit duty benefits under free trade agreements (FTAs) India has entered into with different countries.
For the purpose, FTA Utilisation Mission, headed by a senior officer in the Department of Commerce, will be set up, she said.
"Priority Sector Lending (PSL) norms for export credit have been examined," she said and added that enabling guidelines are under consideration of the Reserve Bank of India (RBI).
Relaxation in PSL norms, the minister, said will release an additional Rs 36,000 crore to Rs 68,000 crore as export credit under priority sector.
The expanded ECIS, she said, will offer higher insurance cover to banks lending working capital for exports, and premium incidence for MSMEs will be moderated suitably.
The government expects the initiative to cost about Rs 1,700 crore per annum.
"This will enable reduction in overall cost of export credit including interest rates, especially to MSMEs," Sitharaman said.
The government also said there would effective monitoring of export financing by the Department of Commerce, and a fully automated electronic refund route will be set up for input tax credit (ITC) in GST to help exporters.
Sitharaman said technology will be further leveraged by timely completion of ongoing initiatives to further reduce 'time to export' through seamless process digitisation of all export clearances (port/airport/customs).
On lines of the popular Dubai Shopping Festival, annual mega shopping festivals in India will be organised in four places across March 2020 in four themes, the minister said.
Focus of the shopping festivals will be gems and jewellery, handicrafts, yoga, tourism, textiles and leather.
Steps were also announced to give a thrust to exports of engineering goods and handicrafts.
The announcement comes in the backdrop of India's merchandise exports declining by 6.05 per cent to USD 26.13 billion in August compared to the year-ago month.