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MeitY urges Finmin to bring back 4% exports sops on smartphones

Meity has warned that unless govt restores sops for phone exports, the $3 bn industry would collapse.

Updated: Dec 14, 2019, 11.51 AM IST
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New Delhi: The ministry of electronics and IT (MeitY) has urged the finance ministry to restore smartphone export incentives that were suddenly halved this month until new benefits were made available.

At a recent meeting, MeitY told the finance ministry that if the 4% export duty credit scrips under the Merchandise Export Incentive Scheme (MEIS) was not reinstated, India’s $3 billion smartphone exports would collapse, causing large-scale job losses.

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“This was a shock to us,” a senior MeitY official told ET, adding that the ministry had made a representation to the finance ministry, seeking continuation of MEIS until new incentives replace it.

“We are actually working on how to further incentivise exports of smartphones from India and removing an existing incentive without a replacement is chaotic for the industry,” the official said.

The Director General of Foreign Trade issued a notification on December 7 reducing the export duty credit scrips given to the industry to 2% from 4%, starting January 1, prompting smartphone manufacturers and exporters to urge the government to retract the move.

Handset manufacturers told ET the move would not only jeopardise existing operations but also fresh investments lined up, raising doubts over achieving the target of $110 billion of mobile handset exports by 2025 under the National Electronics Policy 2019. The policy had helped push the export of smartphones from India to almost $3 billion from only $200 million in two years.

INDUSTRY CALLS ON MINISTERS
Handset manufacturers and component suppliers including Apple, Vivo, Oppo, Foxconn, Flextronics and Xiaomi reached out through industry associations to finance minister Nirmala Sitharaman, communications and IT minister Ravi Shankar Prasad and commerce minister Piyush Goyal, saying the move would severely impact current and future investments in electronics manufacturing.

Speaking to ET, Pankaj Mohindroo, chairman of the Indian Cellular and Electronic Association of India, pointed out how the disabilities in electronic manufacturing vis-a-vis China and Vietnam were only partially met through the 4% MEIS scheme.

He said discussions in the government were about how to scale up this incentive and a committee set up by the Prime Minister’s Office and headed by Niti Aayog CEO Amitabh Kant was to have come up with a WTO-compliant scheme to address the disabilities. The committee, with members from the finance ministry, commerce ministry and MeitY, among others, was to work on how to supplement this 4% incentive.

“This move actually increases the disabilities and discourages production and export from India instead of helping it,” he said.

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In October, the WTO held that India’s export incentive schemes, including MEIS, were inconsistent with provisions of the agreement on subsidies and countervailing measures. India was given 90 to 180 days to withdraw the schemes.

However, experts said the government has appealed against the decision and there is sufficient time to continue with the policy until a WTO-compliant replacement.

The industry said the other export incentive scheme – Remission of Duties or Taxes on Export Products – to be rolled out next year as a replacement for MEIS, is yet to get Cabinet approval and is insufficient.

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