The Centre last week decided to cap the benefits under the Merchandise Exports from India Scheme (MEIS) at Rs 2 crore per exporter on outbound shipments made during September-December, 2020. In a notification, the Director General of Foreign Trade added that new Import-Export Codes, obtained on or after the date of the notification of the above changes, will be ineligible for submitting any MEIS claim for exports made with effect from September 1, 2020. So, how could the decision affect the sector?

According to the government, nearly 98 percent of the exporters who claim MEIS will be unaffected by the changes. Also, as neither coverage of products nor rates of MEIS will be changed, the unaffected exporters who have already factored in MEIS in the pricing of their products do not face any change or uncertainty. Sounds somewhat good. Besides providing huge relief to majority of exporters, the move is expected to give the sector a stable policy environment for exports.

But not all is well -- some experts point out. While the Centre views that less than 2 percent of exporters who claim MEIS are likely to be affected, according to many, though the number of such exporters may not be very large -- their contribution to exports warrants a revisit to the sudden imposition of the cap. Also, orders for exports made during September-December had been negotiated much earlier, and therefore the sudden change will affect the exporters financially.

In addition, the sector raises concern over the fact that the ceiling may be further revised downward if claims exceed Rs 5,000 crore, the total allocation by the government. This leads to uncertainty as even those now eligible for the cap of Rs 2 crore may not be able to factor such benefits. Also, according to many, it would be better if the scheme is extended till March 31, 2021, in line with the existing FTP, and also because implementation of the RoDTEP scheme may be delayed due to the ongoing COVID-19 crisis.

I invite your opinions.