Capping MEIS benefits will seriously affect traders: FIEO

‘Pricing based on existing scheme; new rules to raise costs’

Containers are piled up at a terminal at the Jawaharlal Nehru Port Trust in Mumbai, India, Thursday, June 29, 2017. Operations at a terminal at India's busiest container port have been stalled by the malicious software that suddenly burst across the world’s computer screens Tuesday, another example of the disruption that continues to be felt globally. (AP Photo/Rajanish Kakade)

The government’s decision to cap export incentives under MEIS scheme at ₹2 crore per exporter on outbound shipments made during September-December, 2020 is going to “seriously” affect traders, FIEO said on Wednesday.

The Federation of Indian Export Organisations (FIEO) President Sharad Kumar Saraf said exports that will be made during September-December are based on orders that had been negotiated earlier, factoring in the existing Merchant Export from India Scheme (MEIS) benefit. These benefits are part of the export competitiveness and therefore the sudden change will affect exporters’ financially as buyers were not going to revise their prices upwards, he added.

“However, the sudden imposition of a cap of ₹2 crore per IEC (Import Export Code), on MEIS benefit of exports made during September 1 to December 31, 2020, is going to seriously affect exporters, whose numbers may not be very large, but their contribution to exports warrant a revisit to the imposition of the cap,” he said.

The Centre announced the cap on Tuesday. Mr. Saraf also expressed concern over the outlay of ₹5,000 crore given for exports during September-December, 2020 with the condition that if claims exceeded this limit, the ceiling may further be revised downwards.

“This will create huge uncertainty as those eligible for a cap of ₹2 crore will not be able to factor in even such benefits in their exports,” he added. He urged the Centre to extend the MEIS till March 31, 2021, coterminous with the existing Foreign Trade Policy.

The RoDTEP (Remission of Duties or Taxes on Export Product) committee has started the work, but the industry is facing challenges in providing the data due to frequent local lockdowns, non-availability of transport and non-functioning of auditors.

“Moreover, fixation of rate for over 10,000 items at 8 digits would be a time-consuming exercise, particularly as it has to meet the discipline of WTO,” Saraf noted.

The extension in the MEIS Scheme till March 2021 will help in a smooth rolling of the RoDTEP scheme as well since the scheme is going to stay for zero-rating of exports, he said.