MEIS up 73% for April-December, but still just 40% of total for FY20

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November 13, 2020 7:45 AM

“Further, keeping in mind the ongoing stress on Customs revenues, it’s suggested to limit the issuance of MEIS duty credit scrips in this financial year.

Accordingly, DGFT is requested to issue MEIS scrips up to a total value of Rs 16,000 crore in FY21,” Jha wrote.Accordingly, DGFT is requested to issue MEIS scrips up to a total value of Rs 16,000 crore in FY21,” Jha wrote.

The finance ministry has raised its outlay for a key export scheme by 73% to Rs 15,555 crore for the April-December period from its initial allocation of Rs 9,000 crore, providing some relief to exporters as they struggle to cope with the damaging impact of the Covid-19 pandemic.

However, the revised outlay for the Merchandise Exports from India Scheme (MEIS) for the first three quarters of FY21 will still be way below last year’s level. The finance ministry has approved Rs 39,097 crore for the MEIS for the entire last fiscal.

Earlier this year, both the finance ministry and the NITI Aayog pointed out that the MEIS had been losing its efficacy and the cost to the exchequer far outweighed the benefits in terms of higher exports, a claim disputed by exporters. The massive cut in MEIS allocation came in the aftermath of the pandemic, which strained the government’s finances and forced it to reprioritise expenditure. After December, the MEIS is supposed to be replaced by another scheme that will reimburse exporters taxes on inputs consumed in exports.

In an office memorandum sent to director-general of foreign trade Amit Yadav on Thursday, Gopal Krishna Jha, director (drawback) in the revenue department, said an MEIS allocation of Rs 10,555 crore has been approved for exports between April and August and another Rs 5,000 crore for the September-December period.

“Further, keeping in mind the ongoing stress on Customs revenues, it’s suggested to limit the issuance of MEIS duty credit scrips in this financial year.

Accordingly, DGFT is requested to issue MEIS scrips up to a total value of Rs 16,000 crore in FY21,” Jha wrote.

Merchandise exports witnessed a record 60% crash, year-on-year, in April, although the pace of contraction has since narrowed as lockdown restrictions have been lifted. The exports grew 6% on year in September, the first rise since February, before contracting again by 5.4% in October, as risks from external headwinds still remained very strong.

Notably, the government had in August decided to cap benefits under the MEIS at just Rs 2 crore per exporter during the September-December period. Exporters were also upset that even this limit could be revised down, as the government had limited overall outgo under the MEIS to just Rs 5,000 crore during these four months.

According to a commerce ministry estimate, about 98% of the exporters who claim MEIS will remain unaffected by the changes and less than 2% are likely to be impacted as per analysis of claims in the relevant period of 2018-19. However, some exporters have highlighted that these 2% exporters account for a substantial chnuk of the exports covered under the MEIS.

Earlier this fiscal, starved of resources following the pandemic, the revenue department “suddenly” capped the outlay for the MEIS at just Rs 9,000 crore for the April-December period, which meant that exporters might be deprived of over two-thirds of the benefits they usually get under this scheme. This forced the commerce ministry to block the online module for claiming the MEIS benefits since July 23. However, the online module has been reactivated since September 1.

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