Worried about falling exports, the Centre is considering the option of extending the popular Merchandise Export Incentive Scheme (MEIS) for exporters till the end of the on-going fiscal and offering it to fabrics and yarn as well instead of withdrawing it by end of calendar year 2019.

“Exports are not doing well and policy makers are worried. The government doesn’t want to do anything that could give a further jolt to exporters. So, it would be moving cautiously on the MEIS which is very popular with exporters,” a government official said.

The Remission of Duties or Taxes on Export Product (RoDTEP) scheme, which is scheduled to replace the MEIS from January 1 2010 but is yet to get Cabinet approval, has not received an enthusiastic response from exporters as the rates under the scheme may be lower than the existing MEIS rates, a government official has said.

Also read: Govt assessing cash outgo on proposed scheme of input tax reimbursement for exporters

“Although the rates under RoDTEP scheme are yet to be fixed by the drawback committee, it may be lower than the MEIS rates and have therefore got a negative response from exporters. The government is looking at the possibility of continuing the MEIS till the end of the fiscal instead of withdrawing in from January 1 2020,” the official said.

MEIS, under which export incentives, ranging from 2 per cent to 5 per cent of export value, are extended to a large number of sectors depending on the product and the country being exported to, may be in violation of World Trade Organisation rules. This is because India’s per capita Gross National Income has over-shot the threshold limit of $1000 per annum a number of years back and the time allowed under WTO to roll back export sops is coming to an end.

Read more: Uncertainty ends for exporters with new incentive scheme, but details sought

The benefits available under MEIS are in the form of transferable duty credit scrips which can be used for paying a large number of duties including customs duties on imports.

“Although the government will eventually replace the MEIS scheme with RoDTEP, which adheres to WTO rules, for the next few months it is planning to use the scheme to benefit more exporters,” the official said.

Cotton yarn and fabric, which has taken a beating in the last few months due to low exports and high imports, may get included under MEIS, the official said. “Once yarn and fabric are included in MEIS, they will also get the benefit of RoDTEP when the switch happens,” he said.

In April-September 2019-20, exports fell 2.39 per cent to $ 159.57 billion compared to the same period last year while in August and September this year the fall was over 6 per cent.

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