New Delhi: Mobile phone companies have opposed a move by the government to reduce the rate of new export sops on handsets under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. But the government says the handset makers have no reason to complain, as they are being more than compensated because of the production-linked incentive (PLI) scheme.

The Merchandise Exports Incentive Scheme (MEIS), which offered 2-4% of free-on-board export value as duty credit scrips to handset and component exporters, expired on December 31, and the government is mulling a rate of 0.2-0.7% on mobile phones under RoDTEP, which is replacing MEIS.

Mobile phone companies are also piqued over non-payment of export incentives by the government for the fiscal year ended in March 2020 and the capping of sops at Rs 2 crore per company for the September-December 2020 period.

“We are in an irksome situation … Firstly, the MEIS portal is blocked since September when the government capped the incentives to Rs 2 crore per exporter without any notice, which is unfair,” said Pankaj Mohindroo, chairman of the India Cellular & Electronics Association that represents several smartphone companies.

“Secondly, the government has not yet disbursed the reward for FY19-20. The exports of sub-assemblies and components which had started to rise sharply have been affected by this impasse. Notably, PCBA (printed circuit board assembly) and chargers are also impacted,” he said.

The government had announced an allocation of Rs 39,097 crore for MEIS disbursal for FY19-20, of which handset companies are eligible for Rs 540 crore, according to the value of exports for the period. While this Rs540 crore hasn’t been disbursed as yet, the government has also not given anything to the companies so far in the ongoing FY20-21. The companies are uncertain about the payment for the April-December period of FY21as allocation per exporter was capped at Rs 2 crore per company from September.Under RoDTEP, which replaced MEIS on January 1, the government has set up a committee headed by GK Pillai which is going through the financial data of taxes not subsumed into GST to arrive at the rates to provide incentives.

As per people in the know, while the discussions are still ongoing, the government is mulling a RoDTEP rate of 0.2-0.7% on mobile phones, far lesser to what was promised under MEIS.

But the government believes companies can’t be complaining if they get a lesser incentive under RoDTEP.

“Already they will get a 4-6% benefit for five years under the PLI, and certain income tax benefits as well. The combined impact of new and existing schemes on disabilities will be close to 5.9-10.7%. You can’t expect the exchequer to do more for any company or sector,” a person familiar with the matter said.

But handset makers say low export sops could dampen their export plans.