Export-focussed sectors express disappointment over RoDTEP rates

Export-focussed sectors are unhappy with the guidelines and the tax-refund rates the government has announced under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme that replaced the existing Merchandise Exports from India Scheme (MEIS).

The refund rates under RoDTEP will vary between 0.5 per cent and 4.3 per cent of the export value of goods across marine, agriculture, leather, gems and jewellery, automobile, plastics, electrical, electronics, and machinery sectors.  The industry associations representing these sectors rued that the rates are lower than what companies enjoyed under the now discontinued MEIS scheme.  

Take automobiles for instance. Besides a lower rate, a per unit cap on the rates is also making them dis-satisfied. “The rates are in the range of 0.6 per - 1.5 per cent, compared to the range of 2 per cent to 4 per cent which our members are actually incurring, in some of the segments. However, there is also a per unit cap on the rates, for some of the items, which we understand is due to limited budget availability for RoDTEP,” auto industry body Society of Indian Automobile Manufacturers said in a statement.  

It added that it will continue “to engage with the RoDTEP Committee” to ensure its members are not “exporting taxes” and making India made automobiles less competitive in the overseas markets. India is one of the largest exporters of two and three wheelers in the world.  

But Rakesh Sharma, executive director at Bajaj Auto, said the rates announced for two and three wheelers “are a fair compensation for the domestic levies and taxes on export so that we don’t end up exporting our taxes.”  Bajaj is the largest exporter of the two and sells over 40 per cent of its output in countries outside India.  

The apex body representing cell phone makers too complained of lower rates terming it as a “major setback.” According to Pankaj Mohindroo, chairman, Indian Cellular and Electronics Association (ICEA), currently some $3 billion worth of handsets are being exported from India which makes the export subsidy crucial for manufacturers based here. However, the rates under RoDTEP for most electronics categories are lower than what it used to be under MEIS.

MEIS rate for Mobile Phones was 4% till March 31, 2020. Under RoDTEP, this has moved to Rs24.5 per unit. For other categories of electronic goods - the rate has shifted from 2% under MEIS to 0.8% under RoDTEP.

According to Faisal Kawoosa, chief analyst at TechArc, India currently exports to 24 countries, some of which are further re-exporting, like UAE, to other markets, making India-made phones available to millions of users.

But Bajaj’s Sharma said the RoDTEP rates should not be compared with MEIS rates as the two schemes are driven by different objectives. “The closure will be most helpful in mitigating the cost headwinds the industry has been facing and moreover certainty and clarity is very important for ensuring stable pricing strategies. Similarly, if the MEIS and PLI schemes are also clarified and closed, businesses will be able to make plans and leverage them.”

Vinnie Mehta, director general at Auto Component Manufacturers Association (ACMA), said the apex body is now looking forward to the productivity Linked Incentive Scheme (PLI) and hoping that some of the anomalies facing the manufacturers get addressed.

 “The automotive industry is now keenly awaiting the announcement of the PLI scheme that aims to make manufacturing more competitive.” According to Mehta, there are many factors that make Indian manufacturers globally uncompetitive and MEIS was addressing that to some extent.  It was particularly a savior for small and medium enterprises.  “It was the margin the SMEs were making.”

 At 0.5 per cent to 2 per cent, the RoDTEP rates on auto components are lower than the MEIS rate of 3 to 5 per cent, he said adding that there is an “urgent intervention” required for the manufacturing and export competitiveness.

The apex body for planters also expressed concern. They said they are “greatly disappointed” with the RoDTEP rates announced for plantation commodities including tea, coffee, pepper and cardamom at 1 per cent except for black tea (leaf and dust) in bulk which is at 1.7 per cent and natural rubber at 1.4 per cent. Plantation commodities were earlier getting the benefit of 5 per cent which was subsequently reduced to 3 per cent under MEIS Scheme.

“The lower RoDTEP rates would have serious implications on the competitiveness of the export of plantation commodities from India, especially since exports are on a down-trend. We see no reasons for the reduction in rates except for lower budgetary allocation,” said an UPASI spokesperson.  It said that 400 billion USD vision of export target will be difficult to achieve with these RoDTEP rates.

But not everyone is unhappy. Industry bodies representing gems and jewelry and textiles welcomed the rates. Gems and Jewellery Export Promotion Council (GJEPC) said that the new scheme is a welcome move for the industry. "From zero rebate to at least 0.5 per cent of exports is a welcome move. The sector was as such not getting any benefit under MEIS," said Shah.

According to gems and jewellery industry sources, with exports having taken a hit in the previous fiscal and now recovering, the new scheme will make exports competitive globally. "Even a 0.5 per cent rebate will go a long way in terms of benefits and help create a level playing field globally.

“This is largely a positive decision for the cotton textile and the man-made textile industries. Both knitted and woven fabric and cotton yarns are getting impacted by this,” said Ashwin Chandran, head of The Southern India Mills’ Association (SIMA) and the chairman and managing director of Coimbatore-based Precot Meridien.

(Shine Jacob from Chennai contributed to the story)