Budget 2015: Commerce department seeks support to promote export projects worth $10 billion

NEW DELHI: The commerce department has readied a 2% subsidy scheme to counter the impact of Chinese and American companies and push at least $10 billion worth project exports from the country in Saarc and CIS countries as well as Africa.

Sources said that a pilot project of Interest Equalization Scheme (IES) has received good response but the commerce department, which was pushing it through the Market Assistance Initiative, has put it on hold due to the large funds requirement.

"Due to high requirement of long-term funding commitment, the commerce department has put the plan on hold. It can be resumed as soon as the expenditure department commits to it and provides clarity ," said a source, who did not wish to be identified. Officials said that the funding requirement will be of the order of Rs 400-500 crore this year and should not pose a major problem for the finance ministry , which is trying to encourage Indian manufacturing and exports.

As a result, the commerce department has sought budgetary support for the initiative, which is seen to be crucial to counter the impact of Chinese and American companies and provide a level-playing field to Indian players. The market feedback is that Indian companies are technically and financially competitive, but several countries insist on co financing packages on concessional interest rates.

In fact, the Chinese companies for capital goods as well as those involved in project exports are known to provide finance on concessional rates, a trend which started with US giants such as Boeing that provide loans through US EXIM when major aircraft deals are negotiated.

While the Indian government has been trying to build a capacity with Exim, in the absence of adequate funding, the programme has had limited success. The sources said that $10 billion (over Rs 60,000 crore) of project exports is the initial target and the idea is to scale it up further in the coming years. During 2013-14, projects exports more than doubled to over Rs 22,000 crore (around $3.5 billion).

Apart from services, high technology goods and project exports are expected to get a major push in the new Foreign Trade Policy that is expected to be announced in the next few months.