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Xiaomi, MAIT want MEIS export sops back

The Manufacturers’ Association of Information Technology (MAIT), apex body of electronic product makers, has urged the government to restore the 4-5% incentive under the Merchandise Exports of India Scheme (MEIS).

, ET Bureau|
Updated: Dec 11, 2019, 08.40 AM IST
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NEW DELHI: India’s largest smartphone maker Xiaomi has sought reversal of the government move to cut export incentives by half, saying that it would affect the business significantly and threaten ongoing and future investments.

The Manufacturers’ Association of Information Technology (MAIT), the apex body of electronic product makers, has urged the government to restore the 4-5% incentive under the Merchandise Exports of India Scheme (MEIS).

“At a time when the government is working towards fostering electronics exports from India, it is a surprise to see the reduction in MEIS for the electronics industry… We feel this will discourage exports and negatively impact the current and future investments planned for the sector,” a Xiaomi spokesperson told ET.

“The exports of electronics may stop altogether. The impact will not only halt all exports of electronics from India but will also impact the existing as well as planned investments – much of which are linked to export orders,” MAIT president Nitin Kunkolienker said in a letter to commerce minister Piyush Goyal. “We humbly request to review the notice and reinstate MEIS till a WTO-compliant production incentive is introduced for the electronics and the mobile phones manufactured in India.”

The reduction in the export incentive for most industries barring garments under MEIS from 4% to 2% is likely to hit exports worth about $8 billion. The $3-billion mobile handset exports segment will be hit hardest, Kunkolienker said, adding that at the reduced incentive rates, several contracts that are yet to be fulfilled may have to be cancelled or served at a loss.

Thye government has worked out another export incentive scheme – Remission of Duties or Taxes on Export Products (RoDTEP) – to be rolled out next year as a replacement for MEIS, but it is yet to get the Cabinet approval. After the reduction in incentives under MEIS, the original incentive of 2%, 3% and 5% would remain until RoDTEP is in place.

In October, the World Trade Organisation (WTO) ruled that India’s export incentive schemes, including MEIS, were inconsistent with provisions of the trade body’s agreement on subsidies and countervailing measures. India was given 90 to 180 days to withdraw these schemes. India has appealed the decision.

“The MEIS order has already been appealed in the WTO and the government has sufficient time to continue with the existing commitment and assurance to the industry for the sake of policy predictability and till such time that a WTO-compliant replacement is found,” Kunkolienker said.

Xiaomi, which has invested over $2 billion in India and has got contract manufacturers like Foxconn and component makers like Holitech to invest in India, recently started exports to Nepal and Bangladesh. The company had earlier sought revision of export policies to address structural disabilities when compared to China and ASEAN countries like Vietnam.

“We thereby request the ministry of commerce to review this initiative as it might lead to a significant negative impact on the overall exports potential for the electronics industry from India,” the company said.

Xiaomi suggested that the government should increase the cap on duty drawback for smartphone exports from India. Duty drawback is a refund in payments which were initially collected upon import of foreign-made goods. These payments could have been for customs duties, sales taxes or other fees. The present rate of drawback is 3.9%.

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