The resource-strapped government has capped benefits under the Merchandise Export from India Scheme (MEIS) at just Rs 5,000 crore for the September-December period.
According to a commerce ministry notification, benefits under the incentive scheme to each exporter will be limited to Rs 2 crore for outbound shipments made during the December quarter. However, this Rs 2-crore cap can be further revised, if required, to keep the overall MEIS outgo within the sipulated limit of Rs 5,000 crore, it said.
Earlier, the revenue department had capped the outlay for the MEIS at just Rs 9,000 crore for the April-December period, which means exporters may be deprived of over two-thirds of the benefits they usually get under this scheme. It was not immediately clear if the cap earlier set by the revenue department for the first three quarters of this fiscal has been revised or not. There will be no change in the coverage of MEIS and the applicable rates (up to 5% of the consignment value).
However, new export-import codes obtained on or after Tuesday will be ineligible to submit any MEIS claim for exports made with effect from September 1.
According to a commerce ministry estimate, about 98% of the exporters who claim MEIS will remain unaffected by the changes and less than 2% exporters are likely to be affected as per analysis of claims in the relevant period of 2018-19.
The MEIS outgo was about Rs 40,000 crore in FY19 and Rs 42,500 crore in FY20. For this fiscal, the Budgetary allocation was to the tune of Rs 27,000-30,000 crore, according to industry sources, although there is no official word on it.
Fearing a shortage of funds following the revenue department’s decision, the commerce ministry had, for the time being, blocked the online module for claiming such benefits since July 23. Already, in a letter to finance minister Nirmala Sitharaman on July 21, commerce and industry minister Piyush Goyal had sought a review of the revenue department’s decision.
Merchandise exports witnessed a record 60% crash, y-o-y, in April, although the contraction narrowed to 37% in May, 12% in June and 10% in July, as lockdown curbs were lifted from June. However, risks to exports from external headwinds still remain very strong.