Government decides to cap export incentives under MEIS scheme

The government have decided to cap export incentives under Merchant Export from India Scheme (MEIS) at ₹2 crore per exporter on outbound shipments made during September-December, 2020. It is going to seriously affect traders.

Key point

Exports made during September-December will be based on orders that had been negotiated earlier, factoring in the existing MEIS benefit. These benefits are part of the export competitiveness. The sudden change will affect exporters financially as buyers were not going to revise their prices upwards. However, the sudden imposition of a cap of ₹2 crore is going to seriously affect exporters, whose numbers may not be very large, but their contribution to exports warrant a revisit to the imposition of the cap. Concern over the outlay of ₹5,000 crore given for exports during September-December, 2020 with the condition that if claims exceed this limit, the ceiling may further be revised downwards. This will create huge uncertainty as those eligible for a cap of ₹2 crore will not be able to factor in even such benefits in their exports. So, The Federation of Indian Export Organisations (FIEO) have urged the Centre to extend the MEIS till March 31, 2021, coterminous with the existing Foreign Trade Policy.

What is Merchant Export from India Scheme?

Merchant Exports from India Scheme (MEIS) is one of the two schemes introduced under Foreign Trade Policy of India as a part of Exports from India Scheme. The other scheme is Service Exports from India Scheme (SEIS). MEIS replaced five other similar incentive schemes present in the earlier Foreign Trade Policy 2009-14 viz Focus Product Scheme (FPS), Focus Market Scheme (FMS), Market Linked Focus Product Scheme (MLFPS), Infrastructure incentive scheme and Vishesh Krishi Gramin Upaj Yojna (VKGUY)

Objective: To offset infrastructural inefficiencies and the associated costs of exporting products produced in India.

Month: Current Affairs - September, 2020