AEPC PETITION

Diluting MEIS will kill the revival prospects of the apparel exports

On behalf of all the small and medium exporters of Apparel Export Promotion Council, I strongly request the Government to continue the MEIS Scheme as the apparel sector has recently recovered from a long spell of stagnation. The industry has been showing strong signs of revival with exports growing continuously since Oct 2018 (only June 2019 has shown a decline) and production index for apparel also recording growth since Nov 2018.


Withdrawal of MEIS will derail this growth. There is a need to continue the MEIS or formulate alternate scheme as the industry continues to suffer on account of following:

  • A. Transaction cost of export is very high (8 to 10% of FOB value) compared to other countries on account of high cost of infrastructural inefficiencies.
  • B. High cost of working capital due to high cost of borrowing compared to competitors.
  • C. 9.6% import duty for India’s apparel export to European Union (EU) compared to ‘Nil’ rate for competing countries like Bangladesh and Pakistan
  • D. Countries like China handle similar issues and continue to provide export subsidies upto 17% by way of VAT rebate.
  • E. Logistic cost is presently around 14% of total cost, as against a global benchmark of 10%
  • F. The sector is also disadvantaged due to higher REER

With over 15% cost disadvantage on account input cost differentials, logistic disabilities and market access disadvantage vis-a-vis competitors, the rationale for continuation of MEIS is strong. Not only will dilution of the MEIS support jeopardize the present order book positions, but it will lead to India losing out to Bangladesh and Vietnam in several competing categories.


It may be noted that ROSCTL, which is a reimbursement of taxes already paid by the industry, is not similar in scope or role of MEIS and hence should not be considered as a replacement of the same. Also, with ROSCTL yet to be rolled out and backlogs of more than 8 months reported by a lot of smaller players, there is already a working capital crunch in the industry.


Petition:


Over 8000 small and medium apparel manufacturers request the Government that MEIS for Garments (HS Code 61 and 62) & Made-Ups (HS Code 63) should be continued till the alternate scheme can be formulated and implemented.

H.K.L Magu

Chairman

Apparel Export Promotion Council