New Delhi, Feb 4 (PTI) The government is framing schemes for MSME exporters to provide credit at easy terms, promote alternate financing instrument through strengthening factoring services for them, and offer monetary assistance to deal with non-tariff measures imposed by other countries, an official said on Tuesday.
The commerce, MSME and finance ministries are working on these schemes, Director General of Foreign Trade (DGFT) Santosh Kumar Sarangi told reporters here.
These schemes are being formulated under the export promotion mission, announced in the Union Budget for 2025-26.
The schemes are expected to be rolled out in about 4-5 months, he said.
The government on February 1 announced the setting up of an Export Promotion Mission with an outlay of Rs 2,250 crore to promote the country's outbound shipments.
Finance Minister Nirmala Sitharaman has said through the mission, the government will facilitate exporters to get easy access to credit, cross-border factoring support, and support MSMEs to tackle non-tariff measures in overseas markets.
Earlier, the ministry was getting funds under the Market Access Initiative (MAI), and Interest Equalisation Scheme (IES). It was clubbed under export promotion schemes.
Now these schemes are bundled under the export promotion mission. Though the IES ended on December 31, 2024, the exporting community has been pitching hard for its extension.
"The way IES was operated, it was not clear that it is addressing concerns of a large number of MSMEs," Sarangi said, adding that now the three ministries would give a relook at the issues and may frame a new scheme.
The modalities for the new scheme on offering credit on favourable terms would include a mechanism to facilitate MSMEs to raise export credit without collateral and average collateral cover with a cap on individual exporters.
Now the target will be to support more than one lakh exporters.
At present, MSMEs are asked for collateral while availing export credit. As per different surveys, 4 out of 5 MSMEs face the issue of collateral.
On supporting these enterprises to overcome non-tariff measures (NTMs), the DGFT said that reimbursement can be provided for additional costs incurred by them on account of compliances relating to registration, testing, certification and inspection.
NTMs are far more trade restrictive than tariffs, or customs duties, and negatively affect export market diversification overall and the agricultural sector in particular.
A trade assistance programme (TAP) scheme for risky markets is also under formulation.
Due to limited knowledge and information on risk assessment, banks hesitate to engage in trade finance transactions involving overseas banks/parties.
Exim Bank has been operating a limited-scale TAP scheme successfully by providing counterparty guarantees in risky markets.
He said the proposal is to scale it up with government support to cover a higher number of exporters and facilitate exports in such risky overseas markets.
The modalities of this scheme would include establishment of a risk-sharing fund by the centre.
The bulk of allocation export promotion mission announced in the budget will be used for designing schemes for addressing export credit requirement scheme for micro, small and medium enterprises (MSMEs) and promoting use of alternate financing instruments like factoring, he said.
"The allocation for the mission for this year has been kept at Rs 2,250 crore of which Rs 200 crore is for MAI and Rs 50 crore is for lab-grown diamonds. Rest of the amount is for designing schemes around export credit, cross-border factoring and support to MSMEs to tackle NTMs," Sarangi said.
Sarangi also said that promoting factoring services would help reduce the dependence of exporters on banks.
Export factoring services, a widely used financing instrument globally, have low adoption in India due to high factoring costs involving higher rates of interest, higher risk premiums and lack of parity with subvention schemes.
The cross-border factoring should attain a certain scale to reach about 3 per cent of merchandise exports, in line with the global average, he said, adding that interest subvention can be provided to factoring companies.
The global cross-border factoring is estimated at USD 758 billion but in India, it is only USD 1 billion.