Despite demand from exporters struggling under the weight of US tariffs of 50 per cent, the Finance Ministry is not yet convinced about reinstating the interest equalisation scheme (IES) or providing export incentives in the form of duty credit scrips, sources said.

“The Finance Ministry is not convinced that the IES or duty credit scrips would directly result in increased exports. It is still in discussion on the matter with exporters and the Commerce Department, but it is questioning the efficacy of the schemes and is weighing alternatives to help exporters,” the source told businessline.

Also, there is no agreement yet on increasing allocation under the export promotion mission announced  in the budget for FY26 with an annual outlay of ₹2,250 crore, the source added.

“While the export promotion mission will soon be implemented after it gets all clearances, it is unlikely to include the IES in its earlier form. The disbursement under the scheme in the past years has actually been more than the total allocation for the export promotion mission. With FinMin not wanting to increase allocation, easing credit flow may be through other means such as guarantees,” the source pointed out.

Under the IES, which lapsed in December 2024, the government subsidises bank credit to exporters at pre-determined rates.

Duty credit scrips, on the other hand, are transferable incentives allowing exporters to offset their customs duties on imports.

“Exporters are lobbying hard for continuation of the IES, especially for MSMEs, as it would bring down cost of credit, which, they say, is much higher than those in competing countries. Given the steep 50 per cent tariffs imposed by the US, which is 30 per cent higher than on competitors such as Vietnam and Bangladesh, exporters have also been asking for duty credit scrips of 10-15 per cent to compensate for part of the difference. But things look difficult,” a Mumbai-based exporter said.

The Finance Ministry continues to have questions on the efficacy of the IES, despite studies done by the Commerce Department to establish its relevance in increasing exports, the source said.

“The case for duty credit scrips is even weaker as there is a problem of correlation and attribution because it is not easy to directly link such scrips to the duties on inputs paid by the exporter. It may be WTO non-compliant,” the official explained.

The RBI, right now, is exploring other ways of easing liquidity problems being faced by exporters, including their demand for loan repayment moratorium and a favourable exchange rate.

Published on September 14, 2025