Spices export plunge on withdrawal of MEIS benefits

KOCHI: Spices exports have been hard hit by the discontinuance of incentives under the Merchandise Exports from India Scheme (MEIS) from August. Industry executives said exports fell an estimated 30-35% in the past three months and that there are fears that the situation will worsen if the incentives are not restored.

“We have apprised the commerce ministry about the problem. Unless the incentives are restored, India’s competitiveness in the global market will erode,’’ said Rajiv Palicha, chairman of All India Spices Exporters Forum.

India exports around Rs 18,000 crore worth of spices annually and over the years its dominance has come down to a few spices such as chilli, cumin, turmeric and spice oils and oleoresins from around 20 items.

Exporters claim duty credits ranging from 2-7 % under MEIS which they discovered were disabled by the director general of foreign trade (DGFT) from August 1, resulting in a slowdown in shipments. MEIS was introduced in 2015 under the foreign trade policy.

“Working capital of around Rs 200 crore of cumin exporters in Unjha has been blocked as a result,’’ said U Karthik, a cumin exporter based in Unjha in Gujarat, adding that there is no clarity about the reason for discontinuing the incentives. Cumin or jeera used to attract 7% export incentive.

When contacted, Spices Board secretary D Sathyan said the board has raised the matter with the commerce ministry which in turn is in consultation with the DGFT.

An all exporters’ meeting convened by The Federation of Indian Spice Stake Holders in Mumbai on Thursday said if the issue is not resolved early, factories that are now working at 50 to 60% capacity will have to shut down operations. They participants said the traders have stopped offering fresh quotes to buyers, which has led to 10 to 25% drop in prices, indirectly affecting farmers who are denied a fair price.

“Our margins will be hit as we enter into export deals factoring in the incentives and we cannot back out midway when they are withdrawn,” said Viju Jacob, managing director of Synthite Ltd, one of the leading exporters of oleoresins globally.

Exporters usually have two-year contract with the importers, he said.

Exporters are worried as the new crop of most of the spices is expected to reach market from December. They usually enter into new export contracts by March. “We can’t wait till that time. This issue has to be settled as soon as possible,’’ said Palicha.