The Hindu Business Line : ‘Slashing export sops alone not enough to arrest steel prices’

Welcoming the steps announced in the annual supplement to the Foreign Trade Policy (2004-09) by the Union Minister of Commerce, Mr Kamal Nath, the Chairman of Engineering Export Promotion Council, Mr Rakesh Shah, said here that more innovative measures could have been announced to achieve the targeted 5 per cent share of world trade by 2020.

He said while the commitment to pay 6 per cent interest on terminal excise duty and CST refund was a welcome step, “it is still not clear from which date this is likely to be calculated”.

Lauding the move to extend the DEPB scheme till May 2009 and also interest subvention scheme by another year, he said the policy was virtually bereft of any positive measures to control domestic prices of steel and pig iron.

Pointing out that the council had requested the Government to follow the Chinese example of imposing an export duty of 25 per cent on all categories of steel exports to stabilise domestic prices, Mr Shah said the withdrawal of export benefits alone was not enough to lower domestic steel prices.

He said engineering exports constitute a fifth of India’s total exports, and in the current milieu where the steel and pig iron prices have shot up by 40-50 per cent in the last 11 months, no positive steps to tackle the rising prices of raw materials have been announced. The national export target for the current fiscal has been set at $200 billion. According to him, some major drawbacks in the policy were the attempt to divide the exporting community into different segments, and the doling out of differential rates of benefits. “This goes against a progressive policy thrust that gives a big push equally to all segments of Indian exports,” he said.

He said in the case of engineering exports, there were sectors such as hand tools, bicycle and parts, two-wheelers which have recorded negative growth in 2007-08, and yet were not considered for benefits like interest subvention, which sectors such as apparels and textiles got.

Talking to Business Line, he said the process of rebating fiscal levies has not been adequately addressed. “For instance, the service tax reimbursement is still refund-based and not exemption-based, thus only adding to the significant transaction costs of exporters.” Similarly, he added, it was expected that some steps would be taken to rebate State-level taxes, “but now it seems this issue has been pushed back till the GST system comes into effect”.

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