Increased duty drawback vital for exporters, says expert

Sai Nikesh | The Dollar Business

Raising concerns over Indian government’s efforts to curb steel imports through increase of import duties and imposition of anti-dumping duties, the Engineering Export Promotion Council (EEPC) felt such moves would have a negative impact on engineering exports from India. Speaking to The Dollar Business, Anupam Shah, Chairman, Engineering Export Promotion Council (EEPC), India, said, “Government’s move to protect domestic steel industry through hikes in import duty and consistent efforts for anti-dumping measures should go hand-in-hand with commensurate increase in duty drawback to exporters.” Or else, the engineering exports this fiscal may fall well short of $71 billion in 2014-15, he noted. “With the domestic prices being influenced by such levies, the drawback rates should simultaneously go up,” he noted further clarifying that EEPC is not against support to the domestic industry or against imports from countries like China. If imports are curtailed through duties, the user industries will be completely at the mercy of the domestic steel industry and this results in cartelization of prices, he added. According to EEPC, even though government has raised import duty on both flat and long products by 2.5%, no duty drawback rates were increased. Since, on average, steel accounts for about 50% of total value of engineering products, the duty drawback rates for engineering products should have been raised by 1.25 % at the bare minimum, opined EEPC, seeking ‘rise in duty drawback rate by 60% of the import duty hike, from the current rate of around 1.9%’. EEPC further informed that imports as a percentage of production are only 10.73%, recorded just 2.5 MT despite growth in the first quarter, against a total domestic crude steel production of 22.5 MT (23.710 MT of total finished steel) and consumption of 20 MT. The increasing domestic demand for finished steel is the prime reason for increasing imports, it pointed out. “As it is, steel prices in India are among the highest in the world. It is for this reason it is attracting imports and it also for this reason the Indian steel industry wishes to block imports so that it can raise prices further. This goes against steel user industry and affects over national welfare adversely,” EEPC informed as to have said in its representation to the government. According to EEPC, exports of engineering products, one of the essential groups of India’s export basket with 24% share in the overall merchandise shipments, fell by 10.5 % to $5.4 billion in the month of May 2015 over May 2014. And, the cumulative value of engineering exports recorded a dip by 5.9% to $11.04 billion in the current fiscal from $11.72 billion year-on-year. Going forward, it looks difficult to achieve the last year’s level if immediate measures are not taken to help exporters by way of increased duty drawback and other measures, opined Shah.    

July 21, 2015 | 7:00 pm IST.