The Centre is considering a request made by the electronics sector to restore the incentive under the popular Merchandise Exports from India Scheme (MEIS) to 4 per cent from the current 2 per cent.

Various segments of the industry, including cellular phone manufacturers, have submitted to the government that the reduction in MEIS rates, implemented from January 1, 2020, will hit exports and investments.

“The proposal for restoring MEIS rates for electronics is being considered by the Prime Minister’s Office (PMO). There is a possibility that the demand may be met just for the electronics sector and not the others who have also been affected by the paring down of rates,” a government official told BusinessLine .

Duty-free import scrips

Under MEIS, exporters are given duty-free import scrips that are freely transferable per the given percentage of their export value.

The Centre decided to do away with 2 per cent additional incentive under the MEIS scheme for most sectors, including electronics, from January 1, as it was provided to compensate for GST delays and the problem was no more as severe as before. Electronics manufacturers, however, argue that it would create havoc to their business, as most export orders were contracted at prices based on higher MEIS rates.

Moreover, with stiff competition from countries such as China, Vietnam and South Korea, the lower rates would hit their global competitiveness.

The reduction in MEIS is not in sync with the goals set in the National Policy for Electronics, 2019, to export 100 million handsets worth $110 billion every year by 2025, according to a statement issued earlier by the Internet and Mobile Association of India. The country’s handset exports were worth ₹11,200 crore in 2018-19, according to industry data.

Mobile makers’ plea

Mobile manufacturers were actually urging the government to increase the incentive to 8 per cent.

“While the Centre is looking at restoring the older MEIS rates for electronics, it is also working within the constraints imposed by WTO rules, under which India is no longer eligible to give export sops under MEIS,” the government official said.

Finance Minister Nirmala Sitharaman had earlier announced that MEIS would be replaced by a new scheme for exporters called the Remission of Duties or Taxes on Export Product (RoDTEP), which the government thinks would be compatible with multilateral trade rules.

Although RoDTEP was to replace MEIS on January 1, the latter is being retained for a few more months as exporters want continuity, given the uncertain global demand situation and falling exports. There is now a growing call for the scheme to be extended beyond the current fiscal.

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