Bajaj Auto might lose around Rs 20 crore per month with incentive cap under MEIS

The Directorate Generate of Foreign Trade (DGFT) has estimated that 98% of the exporters’ claim of MEIS will be unaffected by the changes. However, this incentive offered Bajaj Auto significant benefits. More details here!

By:Updated: Sep 03, 2020 10:27 AM

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Two and three-wheeler maker, Bajaj Auto, could lose around Rs 20 crore per month with the government imposing cap on incentives under the Merchandise Exports from India Scheme (MEIS) from September 1, 2020.  The benefit has been reduced to Rs 2 crore per company instead of the Rs 80 crore the company would have got under the scheme, hurting its competitiveness in global markets. Rakesh Sharma, ED, Bajaj Auto, told FE that while the details were not clear, the cap of Rs 2 crore for August to December 2020 was quite meagre. “Two per cent is substantive and the abruptness of the withdrawal further complicates the issue as we are mostly facing off against price driven Chinese competitors overseas,” Sharma pointed. Every percentage counts and this is passed on to the customer and this could translate into a 2.5% increase in prices in the export markets, he said.

The Directorate Generate of Foreign Trade (DGFT) has estimated that 98% of the exporters’ claim of MEIS will be unaffected by the changes. However, this incentive offered Bajaj Auto significant benefits. According to Sharma, Bajaj Auto received Rs 230 crore under the MEIS in FY20. The company on an average got Rs 20 crore per month from the scheme. Bajaj Auto is the country’s largest automotive exporter with the company exporting 2.17 million units in FY20 across 79 countries. In the first five months of FY21, Bajaj’s exports were at 1.70 lakh units out of total sales of 3.56 lakh units.

However, there was good news on the sales performance front with the company witnessing a growth in August 2020 and selling 40% more vehicles than it did in July. Sharma said demand was back and they were preparing for a normal demand during the festival time.  Bajaj Auto’s domestic motorcycle sales grew by 3% to 1.78 lakh units on the back of festival sales with Ganesh festival in Maharashtra and Onam in Kerala. However, exports during August were down 6% to 1.42 lakh. This took total motorcycle sales and CV sales down marginally by 1% to 3.21 lakh for the month. In the commercial vehicles segment, there is no signs of any recovery with a steep 78% fall in domestic sales to 7,659 units and 7% drop in exports to 27,482 units. The total sales from April to August 2020 has halved YoY to 10.55 lakh units.

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