In pics | A look at how the withdrawal of MEIS scheme will impact small exporters

SUMMARY

By Timsy Jaipuria Aug 7, 2020 4:34:05 PM IST (Updated)

The government's decision to withdraw the Merchandise Exports from India Scheme (MEIS) in a phased manner is bound to have an adverse impact on small exporters and would affect fresh investment into various sectors. CNBC-TV18's Rituparna Bhuyan and Timsy Jaipuria visited two small scale units from the engineering and handicrafts sectors to get a sense of how MSMEs are coping with this sudden change in policy.

MEIS benefits for exporters were a significant portion of duties paid on inputs used for exports, which were reimbursed to exporters.

Anoop Gupta of Indofix International was running from pillar to post to get GST refunds to the tune of Rs 1 crore, which were stuck for over 12 months. While dealing with the issue, Gupta was horrified to learn that he can't apply for MEIS, which was a critical export promotion scheme.

Gupta, has managed to successfully compete with Chinese companies in the international market, but is now facing an uncertain future. He told CNBC-TV18, "This is a Brass Cap. The Chinese had occupied this market. We now manufacture it. We provide European quality goods at the prices of Chinese goods."

The MEIS stalemate has come at a time when MSMEs like Indoflix were already battling COVID-19 related disruptions. To make matters worse, export orders plummeted to lowest levels in the past few decades.

Gupta added, "The MEIS issue has impacted us very badly. About Rs 20 to Rs 30 lakh will be stuck this year because of this. Moreover, another Rs 20 lakh will be stuck from last year's. And then there are issues related to IGST and other refunds. About one fourth of my turnover is stuck because of these issues. The government wants Indian companies to compete with China, but then why does it take away the ammunition of your economic warriors."

Like Gupta, exporters from the MSME sector are distraught with the government's decision to not register MEIS scrips. Ashish Wadhwan, for instance has been exporting handicraft for the last 27 years and is waiting for clearance of his pending MEIS claims.

Wadhawan; CEO of Ethnic Artwares said, "MEIS of Rs 1 crore is stuck from last year. This year we have been told that no MEIS will be given as the government does not have any funds. We have already factored in MEIS benefits in our contracts with foreign buyers... Moreover, buyers are asking for 10-20 percent discount to continue with ongoing orders. If MEIS is not given to me and I have to offer discounts, why would I continue with this business? It would be better to just to shut it. We are also seeing higher raw material costs, given the rising cost of diesel. My production has gone down to about 50 percent from what it used to be."

The Revenue Department is yet to release Rs 9000 crore allotted for MEIS disbursals, and said that the Commerce Ministry is yet to respond with a list of eligible MEIS sectors.

On its part, the Commerce Ministry is yet to draw up a list of the sectors that would be offered benefits of the scheme. Stuck between this back and forth, exporters in India have been hit hard due to a decline in demand, GST delays, high credit costs and COVID-19 disruption.