To contain a slide in outbound shipments, the government on Thursday widened the ambit of its Merchandise Exports from India Scheme (MEIS) to offer assistance on items ranging from certain varieties of garments to marine products and engineering goods, which would potentially cost the exchequer an additional Rs 1,500 crore.
While the government included 2,901 new export items to the MEIS, it also raised the rate of incentives for 575 items across 11 categories. “The move will enhance our competitiveness, as 70% of the country’s exportable items will now be covered under the scheme and eligible for assistance from the earlier 46%,” Ajay Sahai, the director general of the Federation of Indian Export Organisations, told FE.
Under the MEIS, the government usually provides exporters duty credit scrip at 2% and 3% of their export turnover, depending upon the product and the export destination, as envisaged in the foreign trade policy 2015-20. The scrip can be transferred or used for payment of a number of duties, including the basic customs duty. The total potential revenue losses for the government under the MEIS is now expected to go up to Rs 23,500 crore a year from the earlier Rs 22,000 crore, according to a commerce ministry estimate.
Sahai said while exporters of all products covered under the scheme will see a rise in their competitiveness, those, particularly in sectors such as textiles and apparel, agriculture, engineering goods, chemicals and ceramics, will be benefited the most.
The country’s exports contracted for 20 of the past 21 months through August, forcing the government to enhance the coverage of the MEIS for a third time since October last year. Exports dropped 16% in the last fiscal to touch a five-year-low of $261 billion, as shipments of petroleum and engineering products declined sharply due to gloomy external environment.
The government already declared some radical changes to labour laws and offered a Rs 6,000-crore package to the garments sector in June, though most of the announcements are yet to be notified. Through these measures, the government is eyeing $30-billion additional textile and garment exports over the next three years.
The new items include traditional medicines like Ashwagandha herbs, certain marine products, onion dried, industrial products such as engineering goods, fabrics, chemicals, ceramics, and a few others. The 11 categories where the government raised the rate of duty credit scrips include iron and steel, handicraft, glass, auto tyres and tubes, and industrial machinery.