Shortage of containers, rising fuel cost are affecting engineering exports: EEPC Chairman

Abhishek Law Kolkata | Updated on October 24, 2021

Mahesh Desai, Chairman, EEPC India

Pending Merchandise Exports from India Scheme (MEIS) dues worth ₹ 35,000 crore pertaining to FY20 and nine months of 2020 (April to December) have impacted the working capital flow of many players, says Mahesh Desai, Chairman, EEPC India.

The EEPC has also taken up issues like availability of containers and low awareness of FTAs as areas of concerns and has approached the Centre to address them.

In an interview with BusinessLine, Desai talks about the outlook for FY22, MEIS dues, and the RoDTEP (remissions of duties and taxes on exported products) scheme, among others. Excerpts:

What is the engineering exports outlook for FY22?

India’s engineering exports reached an all-time high of $81 billion in 2018-19. However, numbers dipped to $76 billion in 2019-20 mainly due to the depression in global trade caused by US-China trade tensions, withdrawal of incentives such as GSP by the US and several protectionist policies adopted by the EU. In 2020-21, there was a further dip to $73 billion.

In the current fiscal, India’s engineering sector has recorded steady double digit export growth in the last few months.

How big are the logistical issues?

The shortage of containers is a direct result of Covid and it has increased logistics charges by a substantial amount. Compounded with the rising fuel cost across the country, this is affecting scalability of Indian engineering exports.

Apart from the above issues, rising raw material prices, low awareness regarding FTAs (free trade agreements) are some of the factors that also affect the exporting community.

Any solutions you have proposed?

Most of these exporters are MSMEs and have limited resources. Hence, we have made some suggestions to the government such as requesting more containers for the US and the UK, roping in inland waterways and extending PLI scheme for container manufacturing.

We are already in discussion with the government regarding these issues and are hopeful of a solution soon.

What is the status of MEIS (merchandise exports from India scheme) benefits from the Centre?

The government has still not cleared the outstanding dues under MEIS to the tune of ₹35,000 crore. The engineering industry has not been able to claim the benefits for FY20 and April-December 2020 (remaining part of calendar year 2020) which is affecting their access to capital.

How do you see the new RoDTEP scheme?

The newly-announced RoDTEP scheme has not included key input sectors such as iron and steel within its purview.

First of all, iron and steel are key inputs in the sector for major engineering manufactures. The embedded taxes within the production of iron and steel sector are important to finally determine the RoDTEP rates of many final engineering products.

Moreover, the iron and steel sector not only constitutes major primary steel producers, but they also consist of a number of secondary steel producers who are mostly MSMEs. These exporters previously used to get MEIS benefit. Therefore not covering them under the purview of RoDTEP scheme is bound to affect their competitiveness.

Even the rates which have been announced (under RoDTEP) are extremely low and insufficient to compensate for the embedded taxes in export production.

All these have led to scepticism among India’s exporters regarding staying competitive in the global market.

Published on October 24, 2021

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