Finance ministry releases MEIS dues but disbursal to be calibrated over next few years

The union finance ministry on Thursday has approved allocation for a key export sop, which were held up earlier this year amidst a dip in revenue collection.

Sources told CNBC-TV18 that North Block has approved allocation worth Rs 39,097 crore for Merchandise Exports from India Scheme (MEIS) benefits for exports undertaken in FY20 and Rs 15,555 crore for exports between April and December 2020.

Sources added that for exports between April and August 2020, MEIS allocation will be Rs 10,555 crore while for September and December, it will be Rs 5,000 crore. As per government guidelines, the maximum amount for MEIS benefits for exports between September and December 2020 will be Rs 2 crore per exporter.

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MEIS is an export benefit scheme through which exporters are given duty-free scrips at pre-approved rates which can be used to pay customs dues on foreign inputs. The scrips are tradeable and used to help Indian exporters cushion the impact of indirect taxes and outcompete exporters from other countries. The scheme will expire on December 31, 2020.

The scheme is administered by the Directorate General of Foreign Trade (DGFT), which has put MEIS registrations of exporters on hold in mid-2020 as the allocations were not released by the finance ministry.

While the scheme will help clear dues of exporters, the issuance of MEIS scrips will be rationed. The finance ministry has instructed DGFT to limit the issuance of MEIS scrips to Rs 16,000 crore during FY21. The balance amount will be adjusted in subsequent years.

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India has decided to stop MEIS by the end of 2020 as the scheme has been challenged at the World Trade Organization for allegedly distorting global trade in favour of Indian exporters.

Moreover, finance ministry and policy think tanks like NITI Ayog believe that MEIS has not been able to push Indian exports in the global trade arena.

The government has instead come up with a new Production Linked Incentive (PLI) scheme through which 13 sectors like mobiles, electronics, auto and components, pharma will be supported through an allocation of nearly Rs 2 lakh crore spread over five years.​