The Engineering Export Promotion Council (EEPC) of India has urged the Commerce Minister to continue with the Merchandise Exports from India Scheme (MEIS) without any ceiling/limit for aluminium exports to survive the current crisis situation.
This letter was sent in the wake of a DGFT notification dated September 1, 2020 imposing a limit of Rs 2 crore per IEC on total reward claims under MEIS for exports between September and December, 2020, which is also envisaging further downward revision to ensure that the total claims are within the prescribed allocation of Rs 5, 000 crore, which is a significant cut in the funds outlay for MEIS from Rs 45, 000 crore in FY - 20.
This move is a huge setback for Indian aluminium exports, struggling to remain globally competitive due to high incidence of unrebated taxes and duties and various global developments, including depressed demand and crashed LME aluminium prices by 30 per cent in the last two years.
The MEIS has been there from much before the pandemic and taking it away at this crucial time when exports are keeping the economy afloat would be a big blow to the GDP which has already seen a drop of nearly 24 per cent in Q1 FY21 on Y - o - Y basis.
This has created an extremely precarious situation for Indian aluminium exports which declined by 11 per cent from $5. 7 billion in FY - 19 to $5 billion in FY - 20, and will further render exports vulnerable and uncompetitive vis - a - vis global players in international markets.
The EEPC also demanded expeditious implementation of Remission of Duties or Taxes on Export Products (RoDTEP) scheme on priority for the aluminium industry to make India's aluminium exports competitive and create a level playing field for Indian exporters vis - a - vis global players in the international markets.
Being a continuous process industry, all the Indian aluminium smelters are operating in the country at around 90 per cent capacity.
The slump in domestic demand is hurting the domestic aluminium industry and it will take substantial time for domestic demand to pick up.
The only option left for the industry to sustain is to export aluminium products to survive the current situation hit by the Covid - 10 pandemic, but the prices are expected to continue to be weak due to demand slump globally.
Aluminium exports are currently eligible for a 2 per cent MEIS reward rate, which itself does not provide ample cushion to remain competitive against the current bearish market condition, which is likely to last long.
The RoDTEP Scheme for exports is yet to be formulated and implemented by the government.
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