Exporters facing huge liquidity challenges due to stoppage of MEIS benefits of over Rs 10k cr: FIEO

By: |
Updated: Sep 14, 2020 7:34 PM

The MEIS (merchandise export from India scheme), introduced in April 2015, will be wound up by December 31, 2020, and the government has already announced the Remission of Duty or Taxes on Export Products (RoDTEP) scheme to replace MEIS. 

The domestic electronics sector companies resumed production and other associated activities after lockdown was relaxed in May.

Seeking support from the government to execute new orders, the Federation of Indian Export Organisations (FIEO) on Monday said exporters are facing huge liquidity challenges due to the stoppage of MEIS benefits of over Rs 10,000 crore from April 1 and IGST refunds. The MEIS (merchandise export from India scheme), introduced in April 2015, will be wound up by December 31, 2020, and the government has already announced the Remission of Duty or Taxes on Export Products (RoDTEP) scheme to replace MEIS.

FIEO President S K Saraf said exporters have started receiving a lot of enquiries and orders from across the globe helping many sectors to show improved performance, which is likely to get better in next few months. “However, exporters, particularly from MSME sector, are facing huge liquidity challenges due to the stoppage of MEIS benefits of over Rs 10,000 crore from 1.4.2020 and IGST (integrated goods and services tax) refund now,” he said in a statement.

At this point of time, he said, when exporters are receiving new orders from new buyers and destinations, support needs to be given to help them to execute such orders. “Unfortunately, many of the exporters have expressed their inability to honour such orders, in view of liquidity challenges, due to stoppage of exports benefits and refund of GST,” he added.

The FIEO president urged the government to look into the issue as any let-up in export efforts, at this juncture, will cost exporters dearly. He added that all departments of the government should sit together to resolve the technical and financial issues, helping the seamless flow of liquidity to exports sector. He also said that banks are helping eligible exporters with the emergency credit line guarantee scheme but due to hold up of GST refund and MEIS, the exporters are forced to seek additional loans from banks and such additional requirement is now subject to very high interest rates.

“Banks need to consider this pragmatically and provide a competitive interest rate to the exports sector particularly as the deposit rates have come down substantially with the reduction in key interest rate. Government needs to pay interest on the delay in refunding GST to compensate the exporters,” he added.

Further, Saraf urged the government to address the issue of risky exporters by providing them duty drawback and IGST benefits against a bond, if physical verification of such exporters has been established. The government has capped export incentives under the scheme, MEIS, at Rs 2 crore per exporter on outbound shipments made during the period from September 1 to December 31, 2020. Contracting for the fifth straight month, India’s exports slipped 10.21 per cent to USD 23.64 billion in July on account of decline in the shipments of petroleum, leather and gems and jewellery items.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1COVID-19 provides opportunity to India, Japan to further strengthen ties: Report
2‘Just when India should be presenting as China’s alternative, Soviet-style statism is creeping back’
3Govt to decide on subsidised cooking gas by BPCL before financial bid stage