Sunday, March 27, 2016

India - Minimum import price on steel to hurt engineering exports: Engineering Export Promotion Council (EEPC) - Our Viewpoint: Comparison is generally done for the cost of raw material with or without import duty bought from different sources

Cautioning the imposition of Minimum Import Price (MIP) on steel products will lead to further erosion in engineering exports, Engineering Export Promotion Council (EEPC) on February 6, 2016 sought from the government a compensatory mechanism to make up for the increased raw material price which the distressed exporters, mostly in the SME segments will be made to bear, following big protection given to the large steel manufacturers. The government on February 5, 2016 imposed a MIP on 173 steel products ranging between $ 341 to $ 752 per tonne.

Our viewpoint: Comparison is generally done for the cost of raw material with or without import duty bought from different sources. One of the key aspects of using steel as the main raw material in the manufacture of machinery/plant components/domestic appliances is its low cost when compared with other material options. Proven performance of the manufactured items is the main expectation for the end-users. Warranty given by the supplier doesn't account the quality of material to decide on its performance. Steel is vulnerable to damages like corrosion when exposed to a variety of complex environments and improper maintenance. There should be a mechanism to include components like the tax credit for achieving the complete life of finished products and also taking efforts on extending its life that will encourage the use of quality material. Then the competition should be in providing the quality materials to the consumers irrespective of  the supply stream - domestic or imported.

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Minimum import price on steel to hurt engineering exports: EEPC
The introduction of the MIP on steel products will raise the cost of raw materials for engineering products by about 6-10 per cent, thus impacting exports
BS B2B Bureau |  Mumbai
February 8, 2016 Last Updated at 13:35 IST
Cautioning the imposition of Minimum Import Price (MIP) on steel products will lead to further erosion in engineering exports, Engineering Export Promotion Council (EEPC) on February 6, 2016 sought from the government a compensatory mechanism to make up for the increased raw material price which the distressed exporters, mostly in the SME segments will be made to bear, following big protection given to the large steel manufacturers. The government on February 5, 2016 imposed a MIP on 173 steel products ranging between $ 341 to $ 752 per tonne.

T S Bhasin, chairman of EEPC India said, “The introduction of the minimum import price on steel products will raise the cost of raw materials for engineering products by about 6-10 per cent depending upon the nature product. This will have a serious debilitating impact on engineering exports which have already declined by a huge 15 per cent in the first nine months of the current fiscal.”

Segments like auto and auto parts, industrial and electrical machinery, products of MSME sector, which in any case have low margins and are facing cut throat competition will face sudden escalation in raw material price, giving a further jolt to the exporters. Moreover, the move will have an inflationary impact on the entire manufacturing sector and leakages of money as all import invoices will be at MIP now. “The Government must provide steel at global competitive prices and EEPC India requests the Government to provide a compensatory mechanism for higher steel prices that the MIP entail on domestic prices. An new International Price Reimbursement Scheme (IPRS) should be immediately introduced,” said Bhasin.

He suggested that the safeguard duties should be removed and not extended further as the MIP has already been fixed. It may be mentioned that the Advance Authorisation route is not used by the MSME sector and has many limitations. Hence unless a price reimbursement mechanism is worked out for engineering exporters, there will be no revival of exports in the next six months, the EEPC chief cautioned.

Article Source: http://www.business-standard.com/content/b2b-manufacturing-industry/minimum-import-price-on-steel-to-hurt-engineering-exports-eepc-116020800496_1.html
Publication Date: 08 February 2016

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