Cap on incentives may affect Indian textile exporters

16 Sep '20

2 min read

Pic: Shutterstock

The Indian government’s decision to cap incentives under the Merchandise Exports from India Scheme (MEIS) at ₹2 crore per exporter for four months till December 31 will likely affect 700-750 exporters of textiles, engineering items, automobiles, chemicals, pharmaceuticals, oil and gas. More than 35,000 exporters claim benefit under the MEIS.

India early this month took the decision following the department of revenue asking the commerce ministry to review MEIS coverage so that its fiscal benefits can be reduced to ₹9,000 crore in this fiscal.

The cap was introduced as the government found MEIS had failed to deliver the desired result of boosting exports, which were worth around $300 billion in the last five years despite its liberal application across sectors.

The government said 98 per cent of the exporters who claim MEIS would be unaffected by the changes as per an analysis of claims in the same period of 2018-19.

The top 50 exporters from these sectors account for around 20% of the benefits under the scheme, the outgo under which was 45,000 crore in fiscal 2020.

It also said the new Import Export Code obtained on or after September 1 would be ineligible to submit any MEIS claim for exports, and the ceiling would be subject to a downward revision to ensure that the total claim didn’t exceed the allocated ₹5,000 crore for the period.

“The large exporters which have high-value exports would get adversely impacted. We also fear that this might act as a disincentive for exporters to become large,” the Confederation of Indian Industry (CII) said in a letter to the ministries of finance, and commerce and industry.

Fibre2Fashion News Desk (DS)

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