New Delhi, Jan 2 (IANS): In a measure of relief for exporters, the cabinet panel on Wednesday approved the provision of 3 per cent interest subsidy to merchant exporters.

Briefing reporters on the decision taken by the Cabinet Committee on Economic Affairs (CCEA), Law and IT Minister Ravi Shankar Prasad said exporters will get 3 per cent interest subsidy on pre-shipment and post-shipment bank credit that will boost liquidity and help make them more competitive in the global market.

"The proposal will entail benefits to exporters to the tune of around Rs 600 crore on interest equalisation," he said.

"CCEA has given approval to the proposal for including merchant exporters under the interest equalisation scheme for pre and post shipment rupee export credit by allowing them interest equalisation rate of 3 per cent on such credit for export of products covered under 416 tariff lines identified under the scheme," a Commerce Ministry release said.

The products are largely in the micro, small and medium enterprises (MSME) segment as well as labour intensive sectors such as agriculture, textiles, leather, handicraft and machinery, it said.

Inclusion of merchant exporters in the interest subsidy scheme launched in 2015 is expected to make exporters more competitive and encourage them to export more products manufactured by MSMEs.

"Additional exports by them will increase production by MSME giving a fillip to employment generation as MSME are generally in the employment-intensive sectors," the statement added.

According to the ministry, there have been regular demands for inclusion in the scheme by merchant exporters who have been impacted hard by the decline in export credit.