AEPC Seeks Increase in Interest Subvention Rate, New Schemes in Budget to Boost Exports

Apex apparel exporters body AEPC on Wednesday sought fiscal incentives, including scrips and increase in the interest subsidy rate for loans in the forthcoming Budget to help the sector tide over US tariff shocks.

In its pre-budget recommendations, the Apparel Exporters Promotion Council (AEPC) has also sought reintroduction of 15% concessional corporate tax rate for new manufacturing units, reduction of GST on textile machinery and a new technology upgradation scheme for micro units.

AEPC Chairman A Sakthivel said the Indian apparel sector is currently facing an exceptionally challenging environment, with sharp tariff shocks in key markets such as the US, coupled with prolonged geopolitical uncertainties that continue to disrupt global trade flows, logistics and demand sentiment.

Sakthivel recommended introduction of a Focus Market Scheme for the sector's exports to the US.

Under the proposed scheme, exporters should be provided freely transferable incentive scrips or certificates equivalent to 20% of the FOB (free on board) value of exports, aligned with the period for which the additional US tariff remains in force, he said.

This would directly offset the tariff burden, ease liquidity pressures, and help Indian exporters retain market share, he added.

The US has imposed steep a 50% tariff on Indian goods entering American markets from August. The high levy has disrupted the country's exports to its largest export destination.

Besides, the apparel exporters' body sought an increase in the interest subvention rate to 5% from the current 2.75% along with relaxation of the ₹50 lakh annual cap.

The current interest subsidy rate and the cap is inadequate given rising borrowing costs.

Additionally, loan moratoriums falling due between September 1 and December 31, 2025 should be extended, offering much-needed breathing space during this period of global uncertainty, AEPC stated.

The council's other recommendations include an accelerated depreciation for technology and capacity upgradation.

To facilitate rapid modernisation and improve liquidity, AEPC suggested 100% accelerated depreciation over two years for export-oriented units on eligible capital assets.

This measure, it said, does not result in long-term revenue loss for the exchequer, but provides immediate cash-flow support, enabling investments in advanced machinery, energy efficiency, and productivity enhancement - critical for competing in global markets.

The apparel exporters' body also demanded the creation of a dedicated Green Transformation Fund.

"This fund should provide long-term soft loans at a maximum interest rate of 5%. It will support garment factories in the domestic procurement or import of sustainability - and green manufacturing-related capital infrastructure (machinery and equipment), enabling the industry to adopt eco-friendly practices and meet global sustainability standards," AEPC stated.