Exporters alert! Limit imposed on total rewards under Merchandise Exports from India Scheme - All details here

As per the latest development from the Ministry of Commerce and Industry, a limit has been imposed on total rewards under the Merchandise Exports from India Scheme (MEIS). A notification issued by Directorate Generate of Foreign Trade (DGFT) says that the total reward which may be granted to an IEC holder under the scheme shall not exceed Rs 2 crore per Import Export Code (IEC) of exports made in the period 1.9.2020 to 31.12.2020.  

Further, it has also been informed that any IEC holder who has not made any exports for a period of one year preceding 1.9.2020 or any new IECs obtained on or after 1st September would not be eligible for submitting any claim under MEIS.  

In addition, MEIS Scheme is withdrawn w.e.f. 1.1.2021.  The above ceiling will be subject to further downward revision to ensure that the total claim under MEIS for the period 1.9.2020 to 31.12.2020 does not exceed prescribed allocation by the Government which is Rs.5,000 Crore.

It is estimated that 98 per cent of the exporters’ claim of MEIS will be unaffected by the changes.  The unaffected exporters who have already factored in MEIS in the pricing of their products do not face any change or uncertainty since neither coverage of products nor rates of MEIS will be changed.  An advance notice of 4 months of the end date of MEIS provides certainty for the future pricing decisions.

Earlier, Aluminium producers had urged the government to continue MEIS scheme for the industry as exports worth $5 billion are at stake. In a letter sent, the Aluminium Association of India (AAI) had urged the Finance Minister and Commerce Minister to continue with the processing of MEIS (Merchandise Exports from India Scheme) applications through DGFT MEIS Portal. It sought continuation of MEIS scheme with enhanced rate from 2 per cent to 5 per cent for all aluminium products to survive the current economic situation.

This letter was sent in wake of the government envisaging cutting the funds outlay for MEIS (Merchandise Exports from India Scheme) from around Rs 45,000 crore in FY 2019-20 to Rs 9,000 Crore for April-December 2020 and diverting these funds for other purposes.

The DGFT has also blocked the MEIS module from July 23 from accepting new applications to limit the issuance of any more scrips.

This has created an extremely precarious situation for the Indian aluminium exports which have declined by 11 per cent from $5.7 billion in FY-19 to $5 billion in FY-20 and further will render exports vulnerable and uncompetitive vis-a-vis global players in international markets.

The aluminium body also demanded inclusion of aluminium in Product Linked Incentive Scheme and implementation of Remission of Duties or Taxes on Export Products (RoDTEP) scheme on priority for aluminium industry to make India's aluminium exports competitive and create a level playing field for Indian exporters vis-a-vis global players in international markets.

Being a continuous process industry, all the Indian Aluminium smelters are operating in the country at around 90 per cent capacity.

The slump in domestic demand is hurting the domestic aluminium industry and it will take substantial time for the domestic demand to pick up.

The only option left for the industry to sustain is to export the aluminium products to survive the current situation due to Covid-19 pandemic, but the prices are expected to continue to be weak due to demand slump globally.

Aluminium exports from India are struggling to remain globally competitive due high incidence of unrebated central and state taxes and duties, constituting 15 per cent of aluminium production cost which is amongst the highest in the world.