India Raises Rice Export Price to Cool Food Inflation

March 28 (Bloomberg) -- India, the world's second-biggest rice producer, increased the minimum export price for the grain to boost local supplies and curb inflation as global stockpiles of cereals fall to the lowest in more than two decades.

Exporters must ship rice for at least 40,000 rupees, or $1,000 a ton, excluding freight, which compares with $650 a ton previously, the trade ministry said in a statement. The price for aromatic Basmati rice was raised to $1,100 a ton.

Record prices are threatening food security in rice-buying nations from the Philippines to Nigeria, and are driving up costs for producers including Anheuser-Busch Cos., the biggest U.S. buyer of the grain, and cereal maker Kellogg Co. Vietnam, China and Egypt are restricting rice exports, and South Korea will release grain from state-controlled reserves to cool prices.

''Not just India but governments across the globe are taking steps to keep prices of staple foods under control,'' said Atul Chaturvedi, president of Adani Enterprises Ltd., India's biggest private exporter of farm goods. ''It's clearly the result of the fight for food and fuel.''

The Food and Agriculture Organization said in February that 36 nations including China face food emergencies this year. World rice stockpiles may total 72.1 million metric tons by end of July, the lowest since 1984, the U.S. Department of Agriculture said.

Rough rice prices have almost doubled on the Chicago Board of Trade in the past year. Rice for delivery in May rose as much as 48 cents, or 2.5 percent, to a record $19.785 per 100 pounds in Chicago today. Wheat reached $13.495 a bushel on Feb. 27, its highest-ever.

'Social Unrest'

''Food prices all over the world are going through the roof and so spread the risk of social unrest,'' investor Jim Rogers said in Singapore today. ''It doesn't matter where, everybody has to pay higher prices for food and that's causing a problem.''

Consumer prices in China, the world's fastest-growing major economy, soared to 8.7 percent in February, the fastest pace in 11 years. In Thailand, prices jumped the most in 20 months, and in Vietnam, inflation is its highest in more than a decade.

Rising prices and shortages of food staples have been felt outside Asia. In Argentina, farmers blocked highways and access to ports and warehouses to protest rising export taxes, leading to a shortage of meat. The nation is the world's second-largest corn exporter and the third-largest soybean supplier.

The Philippines, the world's biggest rice buyer, may reduce the import tax on the grain to as little as 10 percent from 50 percent, Finance Secretary Gary Teves said in an interview today. Sri Lanka scraped customs duty on rice imports, the state-owned Daily News reported today.

Vegetable Oils Tax

India cut the import tax on vegetable oils last week, the fifth reduction since January 2007, and banned exports of all cooking fats for a year, to rein in inflation that's at a 13- month high. Prime Minister Manmohan Singh's government has curbed exports of wheat and lentils, and banned futures trading in some commodities to cool prices before elections in May 2009.

The South Asian nation banned shipments of rice in October, before raising the benchmark price to $650 a ton on March 7 as demand for the grain for welfare programs doubled in the past five years. Exports totaled 3.6 million tons in the year ended March 31, 2007, little changed from 2006.

Investment Funds

Prices of agricultural commodities are being driven by investors looking for alternatives as the dollar and stocks drop.

''Funds have driven up prices to abnormal levels,'' Adani's Chaturvedi said. ''There's a mismatch in supply and demand but not to the extent that warrants current abnormal levels.''

Global investments in commodities rose almost 33 percent to $175 billion last year, according to Barclays Capital. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials climbed to a record on Feb. 29 and is up 16 percent this year.

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DEPB scheme extended to next financial year

New Delhi, March 28 The Government has extended the duty entitlement passbook (DEPB) scheme into the forthcoming financial year that starts April 1, the Commerce Secretary, Mr G.K. Pillai, has said.

“The Cabinet on Thursday extended the scheme in its present form till its next decision”, Mr Pillai told presspersons here. The DEPB scheme is to expire on March 31.

A final decision on extending the scheme is expected in the next meeting of the Union Cabinet. Indications are that the scheme would be continued in its present form for one more year at least.

Meanwhile, the Commerce Ministry on Thursday evening withdrew DEPB benefits on a host of items including cement, steel , manganese and ferro chrome to improve the supply situation in the domestic market.

“Total number of items on which DEPB benefits have been withdrawn would be running into about 40-50” Mr Pillai said here today.

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50 items lose DEPB benefit

The government has withdrawn the benefits of the Duty Entitlement Passbook (DEPB) scheme from nearly 50 items, including steel, cement and certain mineral ores.

The move is aimed at discouraging export of these items, increase their availability in the domestic market and ease prices. This is the latest in a series of steps taken by the government to check rising industrial commodity prices. Inflation has touched a 13-week high.

The Directorate General of Foreign Trade (DGFT) notified these change to the DEPB, a popular duty remission scheme, on Thursday night. The benefits have also been withdrawn from non-basmati rice, manganese, ferrous and chrome.

In another step to increase the availability of rice in the country, the government has also increased the minimum export price for basmati rice to $1100 per tonne (Rs 44,000 per tonne).

“The total number of items on which the DEPB benefits have been withdrawn will run into 40-50. When there is a shortage of steel in the country, why give export incentives? Prices of steel are very high at the moment. Moreover, we do not want cement prices to go up. Anyway, there is hardly any export of cement taking place. We are importing cement at zero duty,” Commerce Secretary GK Pillai said on the sidelines of a Ficci function .

Meanwhile, Commerce Minister Kamal Nath said his ministry would recommend scrapping of import duty on steel, whose rising prices have contributed significantly to recent surge in inflation.

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Illogical ban on castor oil export

Mumbai, March 25 Hasty decisions often lead to unintended consequences; and our government is in the habit of taking hasty decisions that hurt not the Government itself or the officials responsible for such decisions, but industry and trade who are at the receiving end of such decisions.

Notification (No. 85 dated March 17) banning of edible oil export is a case in point. Export of all edible oils under chapter 15 of Schedule I to the Export Policy has been prohibited.

Chapter 15 lists several vegetable oils, both edible and non-edible, including castor oil which is an industrial oil.

Customs authorities have stopped processing documents for export of castor oil citing the DGFT notification. No official in the Commerce Ministry or in the DGFT office seems to have had a look at Chapter 15 in the Policy book or applied his mind while drafting the notification.

The consequence is that castor oil exports stand banned. Very clearly, it is a faux pas. Someone must assume responsibility for it. The decision needs to be reversed and it should be specifically clarified which oils are banned and those allowed for export. But if we know the way of the government, the clarification is unlikely to come out anytime soon. The Commerce Ministry will have to set off a round of correspondence with other concerned ministries (Food and Consumer Affairs, for instance) and seek their clearance - a process that will take time.

Meanwhile, castor oil export contracts are in a state of limbo. While domestic market for both oil and seeds may collapse and hurt growers, prices overseas are likely to shoot up.

Indian exporters may also be dragged into arbitration proceedings.

India is the world’s largest producer and exporter of castor oil.

The world market depends on India as an origin to supply the global needs. Castor oil is used for a number of industrial applications including paints, varnish, resins, plasticisers and so on. Annual export of this versatile industrial oil is about 2,00,000 tonnes and the country earns over Rs 800 crore in foreign exchange. There is also a growing market for value-added castor oil products such as derivatives - hydrogenated castor oil, dehydrated castor oil and so on. Current export prices of $ 1,300 a tonne are quite attractive considering strong global vegetable oil market.

The totally unexpected decision to ban export is turning out to be a matter of acute embarrassment for the exporters here. They are unable to explain the rationale behind the export ban. Ironically, it was exactly a month earlier that the Solvent Extractors Association of India (SEA) successfully held an international seminar for promoting castor oil exports in which a number of overseas delegates including from countries as far apart as China and Holland participated.

The other unintended consequence of the hasty ban on export is that vegetable fats of tree-borne oilseeds also stand prohibited. According to SEA, we export about 10,000 tonne of vegetable fats from minor forest produce (sal fat, mango kernel fat, kokum fat etc). Tribals do the collection of tree-borne oilseeds and there is no domestic market for these special fats. It makes little sense to prohibit the export of minor forest produce and hurt the interests of tribals.

The trade and industry will be forced to bear the negative consequences of an unthinking ban by the Commerce Ministry. Clearly, policy risk to business – especially agribusiness – stands heightened. All notifications state that the decision is taken in public interest. It is time the Government is forced to spell out what public interest its decisions serve. -- G. Chandrashekhar

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10,000 tonnes castor oil for exports held up

Chennai, March 25 Castor oil does not figure in the Directorate-General of Foreign Trade’s Chapter 15 that lists animal or vegetable fats and oils and their cleavage products; prepared edible fats, animal or vegetable waxed. Nor is it listed in Rule 5 list of edible oils under the Prevention of Food Adulteration Act. Still, castor oil exports are not being allowed by Customs authorities, citing the Centre’s ban on export of all edible oils from the country.

Controlling inflation

The Centre had imposed the ban on March 17 as part of its efforts to keep rising edible oil prices and inflation under leash.

Confusion prevails at ports where at least two ships are waiting to load castor oil for exports. According to industry sources, 8,000 tonnes of castor oil are to be loaded in these ships. Also, another 100 containers each with 20 tonnes of castor oil have been held up at inland container depots or container freight stations for exports.

“Totally, 10,000 tonnes are now held up at ports awaiting clarification. Plus, these two ships pay $10,000 a day as demurrage charges,” said the sources.

Referred to ministries

Customs authorities are asking exporters to get things clarified from the Directorate-General of Foreign Trade, which in turn, has referred it to the Commerce Ministry. In turn, the Commerce Ministry has now asked the Consumer Affairs Ministry if castor oil falls under the purview of edible oils.

Meanwhile, the Solvent Extractors Association of India has written to the Commerce Ministry, seeking immediate instructions to the Customs authorities to allow the exports of castor oil.

“Our members are exporting castor oil for paint, lubricants and other industrial applications,” said the Solvent Extractors Association of India Executive Director, Mr B. V. Mehta, in his letter. On the other hand, industry sources said the ban would not have any effect and as such, exports of edible oils during the last two fiscal had been negligible.

“But for this year, when 30,000 tonnes of groundnut oil were contracted for exports, hardly 3,000 tonnes of all oils put together were imported,” the sources said.

crude sesame oil

According to official data, crude sesame oil exports declined to 821 tonnes during 2006-07 from 1,682 tonnes the previous year. Refined sesame oil shipments slipped to 818 tonnes (1,662 tonnes) and coconut oil to 48.9 tonnes from 60.9 tonnes. Mustard oil, crude and refined, however, witnessed a different trend rising to 597 tonnes (437 tonnes) and 103 tonnes (36 tonnes) respectively.

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Export of spices at new peak, near $950 million

Kochi, March 25 With the current financial year drawing to an end, export of spices from the country has touched a new peak both in volume and value. Exports in volume totalled 3.77 lakh tonnes, valued at Rs 3,785.40 crore ( $940.47 million), during April-February of the fiscal.

Export earnings of spices have exceeded the target fixed for the year both in dollar and rupee terms. Compared to the export performance of 3,25,076 tonne valued Rs 3,177.54 crore ($700.77 million) during the same period last year, exports registered an increase of 16 per cent in volume and 19 per cent in rupee value terms (34 per cent in dollar terms), according to an official release.

Against the target of 3.80 lakh tonnes, valued at Rs 3,600 crore ($875 million), fixed for the year, 107 per cent of the dollar value (105 per cent in rupee value) and 99 per cent of the volume have been achieved during the 11 months of the current financial year. The export during the period has also surpassed the record performance of 3,73,750 tonnes valued at Rs 3575.75 crore ($792.95 million) during 2006-07.

During April-February 2007-08, export of pepper, chilli, curry powder and mint products exceeded targets both in terms of volume and value. Export of coriander and cumin exceeded target in value terms and vanilla in volume terms.

Pepper, chilli, coriander, fennel, fenugreek, vanilla and other miscellaneous spices performed better than last year. Value-added spice products such as curry powder, spice oils and oleoresins and mint products have also done better compared with last year. Performance of some of the items such as cardamom (small and large), ginger, turmeric, cumin, celery, garlic and nutmeg and mace fell short of last year’s performance.

Pepper export

During the 11 months of 2007-08, the export of pepper from the country has been 31,750 tonnes valued at Rs 466.38 crore, which is higher by 20 per cent in quantity and 68 per cent in value compared with last year’s achievement of 26,415 tonnes valued at Rs 276.79 crore. The average f.o.b. unit value has increased to Rs 146.89 a kg from Rs 104.79 a kg last year.

The export of chilli from the country has exceeded the last financial year’s total export performance of the commodity and reached an all-time high, both in terms of quantity and value. During the period, India has exported 1.69 lakh tonnes of chilli valued Rs 906.44 crore against 1,23,330 tonnes valued Rs 668.44 crore of the last fiscal.

Currently, India is the major source of red chilli in the international market. The stringent quality measures implemented by the Board, viz. mandatory sampling and analysis for presence aflatoxin and adulterant Sudan in export consignment of the product has made Indian chilli more acceptable in the international markets.

seed spices

Among the seed spices, coriander, fennel, fenugreek and other seeds such as mustard, dill and celery have performed better than last year. During April-February 2007-08, 22,750 tonnes of coriander valued Rs 94.32 crore exported against 17,890 tonnes valued Rs 65.35 crore of last year.

East European countries such as Romania and Bulgaria, where coriander is produced, has suffered drought condition and the supply from these origins are on a lower side. During the year, 4,450 tonnes of fennel valued at Rs 23.91 crore was exported against 2,835 tonne valued at Rs 19.04 crore last year.

In the same period, export of fenugreek has increased to 10,000 tonnes valued at Rs 29.67 crore against 6,865 tonnes valued at Rs 22.24 crore last year.

In the case of cumin seed, there is a slight decline of 4 per cent in export volume from 23,650 tonnes to 22,750 tonnes.

However, the export value has increased by 33 per cent as the export unit value realisation has gone up from Rs 76.64 a kg in 2006-07 to Rs 105.58 a kg in 2007-08. During the period, the export of vanilla from India has increased by 77 per cent in volume and reached 190 tonnes, against 107 tonnes in 2006-07.

During April- February 2007-08, export of valued-added spices such as curry powder, spice oils and oleoresins and mint products increase dboth in terms of quantity and value compared with the same period last year. The export of curry powder has reached an all-time high of 10,400 tonne valued at Rs 100.23 crore registering an increase of 21 per cent in volume and 29 per cent in value over last year. In the case of spice oils and oleoresins and mint products, the growth in terms of value has been 6 per cent each. In the case of oils and oleoresins, the quantity exported has increased from 5,655 tonne to 5,760 tonne and value realisation from Rs 462.17 crore to Rs 490.71 crore.

During the period, the export of mint products has also increased from 15,020 tonne valued Rs 1,016.35 crore to 17,500 tonne valued at Rs 1076.38 crore. Export of mint products accounts for 28 per cent in terms of value of the total export of spices from India. Spice oils and oleoresins and mint products together accounts for 41 per cent of the total export in terms of value.

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Time to give cashew a growth push

Indian cashew industry’s dependence on other producing countries for raw cashew nuts appears to have become a perpetual phenomenon as indigenous supply has not been able to keep pace with the processing industry’s ever-growing requirement.

Rising imports

Import of raw nuts, which began at around 1.3 lakh tonnes in the 1980s following the increase in exports of cashew kernels from the country and due to non-availability of the raw material in required quantity indigenously, has been growing steadily. This trend continued with the expansion of the processing capacity of the industry to meet the growing demand from overseas and domestic markets.

In 2006, while the total processing capacity was 12 lakh tonnes of raw nuts, the indigenous production was only 5.73 lakh tonnes. The industry, therefore, imported 5.65 lakh tonnes of raw nuts from other countries, especially in Africa.

According to official sources, the increased dependency on imports is fraught with danger as theexporting countries could start processing their own raw nuts. Hence, concerted efforts are needed to achieve self-sufficiency in production of raw nuts.

Unfocussed research

At present, cashew research appears to be lacking in direction and focus. An extension campaign is required among farmers to make them aware of the benefits of scientific cultivation techniques. At the same time, modernisation in processing, product diversification, value addition and marketing of Indian cashew under a brand are required. If the cashew industry has not achieved the desired levels of growth it must be because of poor coordination and co-operation in planning, chalking out programmes and implementation. All these point to the need for a representative body with sufficient autonomy.

The available data show that the quantity of raw nut processed in India has doubled in the last decade. The total raw nut processing is divided at an average ratio of 52:48 among local production and import. If this trend continues for the next ten years the requirement of raw nut would be 17 lakh tonnes by 2016.

Exports of cashew kernels have also been showing a steady increase, from 1,00,828 tonnes in 2002-03 to 1,26,667 tonnes in 2006-07. And the export earnings were Rs 1,804.43 crore and Rs 2,709.24 crore respectively.

Imports of raw nuts have gone up from 4,00,659 tonnes valued at Rs 1,236.57 crore in 2002-03 to 5,92,604 tonne valued at Rs 1,811.62 crore in 2006-07.

The rate of growth in Indian raw nut production, given the vast area under the crop, has not been at the desired levels.

Indigenous availability, which was at five lakh tonnes in 2002-03 increased to 5.73 lakh tonnes in 2005-06.

Growing demand

Though the domestic demand is yet to be assessed accurately, it is estimated it is increasing at a phenomenal rate due to increased awareness among people about the health benefits and nutritional value of the nut. As such, demand is likely to increase, which is viewed as beneficial from the farmers’ and industrial point of view. Given this situation, there is an urgent need to step up domestic production on a war footing.

Looking back

In fact, development of cashew cultivation was taken up in 1955 (the beginning of the Second Plan), as part of initially as part of the afforestation activity. After the formation of the Directorate of Cashew Development in 1966 a coordinated effort for the promotion of this crop with a national outlook was taken up, such as the World Bank-aided Multi-State Cashew Project (MSCP) in Kerala, Karnataka, Andhra Pradesh and Orissa during the Sixth Plan. It was during the Seventh Plan that multiplication of high yielding varieties through scion banks was initiated.

To increase production and productivity a two-pronged approach — extensive and intensive cultivation — was implemented during the Eighth Plan. During the next Plan an outlay of Rs 70 crore was made for cashew development programmes in the country.

However, with the emergence of macro management policy for agriculture during the Tenth Plan, the role of the Directorate of Cashew and Cocoa Development (DCCD) was redefined. As a result, the role of the DCCD was reduced to monitoring the status of execution of the programmes by States, in addition to implementation of direct funded components.

In 2005-06, the National Horticulture Mission (NHM) was launched to promote holistic growth of the horticulture sector and since then cashew development programmes are being pursued under the mission. Though areas planted with high yielding varieties of cashew have substantially helped in increasing production and productivity, areas raised with seeds and seedlings prior to the Eighth Plan with a forestry approach is playing a negative role in boosting production. It is estimated that a total area of 3,05,000 hectares of plantation at present falls under the senile and unproductive category, that is, 30 years and above of age.

In fact, considering its importance, the Office of the Prime Minister has identified “re-plantation of senile cashew plantation” as a thrust area. The Finance Minister in his 2007-08 Budget speech had announced a ‘special cashew fund’ to be set up in the pattern of Tea Fund. The Commerce Ministry has also designed cashew development programmes under the thrust area ‘Revival of Plantation Crops Economy’.

With all these efforts, the total area under cashew has expanded to 8.37 lakh hectares and an annual production of 5.73 lakh tonnes with a productivity of 815 kg/ha as against over 2,500 kg/ha in Vietnam.

A boost required

India is still the world’s largest producer, consumer and exporter of cashew nuts. Above all, it provides employment to around five lakh workers, over 90 per cent of them being rural women. Besides, it provides livelihood to lakhs of small and marginal farmers, who do the cultivation in an unorganised and unscientific manner.

The farming practices and post-harvest technology are traditional and backward. It has already been found that this crop can be grown in all types of soils, including wasteland and rocky terrains.


(This article was published in 'The Hindu Business line dated 25.3.2008 written by G. K. Nair)

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Steel producers oppose regulator

MUMBAI: The Indian Steel Alliance (ISA), an association comprising SAIL, Tata Steel, Jindal, Essar and Ispat Industries, is averse to the idea of setting up a steel regulator. The association feels that any such move will impact the Indian steel industry and discourage investment. The solution to spiralling steel price, it feels, lies in creating new capacities and not capping prices. The ISA voiced its views after steel minister Ram Vilas Paswan proposed a regulator to rein in prices. The steel minister on Wednesday had asked the prime minister to impose export duty on steel, remove import duty and withdraw DEPB benefits for steel makers to contain prices.

The ISA, in turn, has attributed the price rise to higher raw material prices. Arguing its point, the association also said the current price of around $800 a tonne is among the lowest in the world. An affiliate to the Confederation of Indian Industries, the ISA on Thursday wrote a letter to the PM requesting him not to take any step towards setting up a regulator.

The letter, written by ISA president Moosa Raza, has no mention of Mr Paswan, possibly to avoid a direct confrontation with the steel minister. It said the association is perturbed by “media reports” on the proposal for an independent steel regulator. It asked the PM to encourage the industry through reduction of excise duty and allotment of iron ore mines.

Iron ore is the key raw material for production of steel. The iron ore deposit is estimated at approximately 23.59 billion tonnes, scattered across Jharkhand, Orissa, Chhattisgarh, Karnataka and Goa. However, allotment of ore is an issue in expanding the industry.

The letter explained at length on how the prices of raw materials have gone up in the recent past. Any regulator can, at best, regulate prices only at the manufacturers’ level. The intermediaries can not be brought under any regulator’s purview, the letter said. “Price regulation will only benefit these intermediaries and will encourage corruption among the inspecting agencies... Moreover, the government should keep in mind that any proposal to appoint a regulator would open a Pandora’s box and there will be many demands to appoint a regulator for other commodities. We should not place ourselves in a situation where we go back to a controlled regime,” said the letter.

The domestic steel industry is likely to see an investment of more than Rs 5 lakh crore, which is over six times the total money ploughed into the sector since independence. This would create a production capacity of over 240 million tonnes, nearly five times of what the country has now. The industry is expected to witness an addition of another 50 million tonne over its existing 48 million tonne in 2011-12.

According to a steel ministry document, 193 MoUs have been signed between investors and state governments as on July 1, 2007, to create an additional capacity of 242.9 mt at an investment of Rs 5,14,038 crore.

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Textile exports to US show rising trend, beat Rupee blues

NEW DELHI: Despite rupee appreciation, Indian textile and apparel exports to the US for 2007 showed a marginal increase in value terms over the previous year, even as unit value realisation came down. The US comprises 25-30% of Indian textile and apparel exports and so growth in exports to the US means exporters may have been able to successfully handle the rupee appreciation.

The steep rupee appreciation of last year had hit textile exporters earnings in rupee terms and had blunted their competitive edge in international market. As the crisis deepened many exporters were finding it tough to garner new business contracts, leading to decline in textile export figures in several months of the last year. The scene, however, seems to have improved as the year closed.

According to the latest US government data, US textile import in value terms increased 3.35% in 2007 over the previous year, while volumes increased only 1.84%, clearly showing that the per unit prices paid by US importers in dollar terms were higher in 2007 compared to the previous year. But for Indian exporters per unit realisation actually went down, as is evident in its growth figures for textile exports in value and volume terms.

Indian textile and apparel exports to the US rose in value terms to $5,103 million in 2007, up 1.45% over previous year. The volumes, however, were marginally better. It went up 2.56% to 2722 sq meter equivalent (sme).

“Textile and apparel exporters cut prices to retain their market share. Therefore, the unit value realisation for exporters came down even as they managed to marginally increase their export in value terms,” says Confederation of Indian Textile Industry secretary general D K Nair.

In the apparel segment, however, Indian exports to US increased in volume (from 840 sme to 867 sme), but declined in value (from $3186 million to $3169 million). “There is more competition in the apparel category compared to textile. We face stiff competition from low-cost producers such as China and Bangladesh,” explains Mr Nair.

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Industry sees only troubles, no gains from China FTA

NEW DELHI: The government has been urged to adopt a cautious stand on free trade agreement (FTAs), especially in the case of countries like China, and discourage export of raw materials. Import duties should come down gradually under such pacts and India Inc should be enabled to face global competition, says a study by industry chamber Assocham. While acknowledging that India cannot shy away from globalisation, the government has been asked to beef up infrastructure and provide a favourable exchange rate mechanism to ensure a level playing field.

“The government should consult the industry before signing FTAs. It is important to take industry representatives into consideration,” Assocham president Venugopal Dhoot said. The debate generated by the chamber is timely since India is negotiating a flurry of trade deals at this juncture. Since the Doha round talks at the World Trade Organization (WTO) are not progressing, most member countries are focusing on bilateral and regional agreements to boost market access.

In the case of China, the Assocham study has pointed out that India has a trade deficit and there are apprehensions about cheap imports from the neighbouring country swamping the Indian market. There will be no benefit for Indian industry from the deal, the chamber feels. Most of India’s anti-dumping cases are against China and ‘market economy’ status has not been granted to the country even after it joined WTO. At the same time, China is emerging as India’s top trading partner and is likely to overtake the US soon to capture the apex slot.

“The apprehensions are that since India’s tariff levels are much higher than China, any reduction in tariff will open the floodgates of cheaper imports from China. On the other hand, China’s tariffs are already fairly lower than India.

Therefore, Indian producers can expect no serious market benefits from China through a FTA,” says the study.

Apart from China, India is now negotiating FTAs with the European Union, ASEAN, Mercosur, SAARC, Gulf countries, South Korea, Thailand, South Africa and a number of neighbouring countries.

India should start with preferential trade agreements (PTAs) before going on to FTAs, feels Assocham. In the meanwhile, the government should improve infrastructure, bring down import duty levels gradually and reduce income-tax rates. “There should be a gradual lowering of tariffs with some time table so that Indian industry can take appropriate steps. Technology purchases and research programmes should be initiated to take advantage of economics of scale as well as to increase employment,” says the study.

“Threshold of corporate tax be raised and the percentage tax be reduced. The import duty tax and various local taxes should be reduced on fuel so that the prices of petrol and diesel are more comparable to that of other countries,” it has been emphasised. The study is being submitted to the commerce department and the likely to be disseminated for wider debate.

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IMPORT DUTY ON EDIBLE OILS REDUCED - PRESS RELEASE

Government has been keeping a close watch on the domestic and international prices of essential commodities, particularly food items such as wheat, rice, pulses, and edible oils so as to keep inflation under check. It has also taken appropriate fiscal measures from time to time to achieve this objective. Full exemption from customs duty available to wheat has been extended beyond the expiry date of 31st December, 2007 and wheat flour has also been fully exempted from customs duty.

Over the last six months, the international price of rice has increased sharply from US $ 430 (August 2007) to US $ 590 (February 2008) (FAS US Gulf). Domestic retail price in Delhi markets increased from Rs.15 to Rs.18 per kg over the same period.

Owing to a surge in demand, international prices of edible oils have also continued to exhibit a sharp and steady upward trend in recent months. For instance, the international price of crude palm oil (fob Malaysia) has increased from US$ 770 PMT in the last week of August, 2007 to about US$ 1220 PMT in the last week of February, 2008. During the same period, the international price of sunflower oil (c.i.f. Rotterdam) has increased from US$ 947 to US$ 1695 PMT – an increase of about 79%.

An increase of this order has obviously put pressure on domestic prices of edible oils despite two rounds of reductions in customs duties on palm oil in April, 2007 (by 10 percentage points) and again in July, 2007(by 5 percentage points). Wholesale prices of RBD palmolein (Mumbai) have increased from Rs.4500 per quintal in August 2007 to Rs.5820 per quintal in February, 2008. Over the same period, price of sunflower oil (Mumbai) has increased from Rs. 4900 per quintal to Rs. 8250 per quintal and of mustard oil (Delhi) from Rs. 4960 per quintal to Rs. 6330 per quintal.

To cushion the impact of increase in international prices of rice and edible oils, with effect from the midnight of 20th/21st March, 2008 Government have reduced import duty on these items as under:

a) Semi-milled or wholly milled rice from 70% to Nil. This exemption would be available only upto 31.03.2009.
b) Crude palm oil including crude palmolein from 45% to 20%;
c) Refined palm oil including RBD palmolein from 52.5% to 27.5%;
d) Crude Mustard/rapeseed/colza/canola oils from 75% to 20%;
e) Refined Mustard/rapeseed/colza/canola oils from 75% to 27.5%;
f) Crude sunflower oil from 40% to 20%; and
g) Refined sunflower oil from 50% to 27.5%.

Besides, the tariff values of crude palm oil (US $ 447 PMT), RBD Palm oil (US $ 476 PMT), crude palmolein (US $ 481 PMT), and RBD Palmolein (US $ 484 PMT) have been frozen at July, 2006 prices.

Notification No.37/2008-Customs dated 20th March, 2008 has been issued in this regard.

BSC/ GN-71/08

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Customs duty on Veg Oils reduced drastically

New Delhi, March 20 The Centre on Thursday slashed import duties on all crude and refined edible oils as part of its attempt to cushion the impact of increase in the global vegetable oil prices. It also decided to exempt semi-milled and wholly milled rice from import duty and specified that this exemption would be available up to March 31 next year.

While the import duty on refined edible oils has come down across the board to 27.5 per cent, the duty has been reduced to 20 per cent for all crude oils.

Specifically, the import duty on crude palm oil including crude palmolein has been slashed from 45 per cent to 20 per cent. On the other hand, import duty on refined palm oil including RBD palmolein has been brought down from 52.5 per cent to 27.5 per cent.

While import duty on crude mustard/rapeseed/colza/canola oils have come down from 75 per cent to 20 per cent, the import duty on refined mustard/ rapeseed/ colza/ canola oils has been slashed from 75 per cent to 27.5 per cent.

For crude sunflower oil, the import duty has been halved to 20 per cent from 40 per cent. The import duty on refined sunflower oil has been cut from 50 per cent to 27.5 per cent.

An official release also said the tariff values of crude palm oil ($447 a tonne ), RBD palm oil ($476 a tonne), crude palmolein ($481 a tonne), and RBD palmolein ($484 a tonne) have been frozen at July 2006 prices.

The release said owing to a surge in demand, international prices of edible oils had continued to exhibit a sharp and steady upward trend in recent months. For instance, the international price of crude palm oil (f.o.b Malaysia) has increased from $770 a tonne in the last week of August 2007 to about $1220 a tonne in the last week of February 2008. During the same period, the international price of sunflower oil (c.i.f. Rotterdam) has increased from $947 to $1695 a tonne – an increase of about 79 per cent .

An increase of this order has obviously put pressure on domestic prices of edible oils despite two rounds of reductions in customs duties on palm oil in April, 2007 (by 10 percentage points) and again in July, 2007(by 5 percentage points). Wholesale prices of RBD palmolein (Mumbai) have increased from Rs 4,500 per quintal in August 2007 to Rs 5,820 per quintal in February 2008, the release said.

Over the same period, price of sunflower oil (Mumbai) has increased from Rs 4,900 a quintal to Rs 8250 a quintal and of mustard oil (Delhi) from Rs 4,960 per quintal to Rs 6,330 a quintal.

Rumours had been agog since the beginning of this week on the duty cut and domestic prices have been reacting to the possible move of the Centre. However, the reduction in duty comes after prices have begun to cool and, in fact, declined to pre-budget levels. On Tuesday, as another measure to curb inflation, the Centre had banned export of all edible oils.

The move also comes at a time when the arrival of rabi oilseeds crop is due. Rabi oilseeds crop is seen down on lower coverage of crops such as mustard and sunflower. The futures market also reacted sharply on Thursday with soyabean and rapeseed/mustard oils counter witnessing the prices hitting the lower circuit.

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Six new SEZ proposals cleared

New Delhi, March 20; The Board of Approval for SEZs on Thursday cleared six fresh proposals for setting up special economic zones in the country, taking the total number of such approved zones to more than 450.

The Board of Approval (BoA), chaired by the Commerce Secretary, Mr Gopal K. Pillai, took up nine proposals, of which five were granted formal approvals and one in-principle. Excluding the six approvals granted today, the board has granted formal approvals to 449 SEZs, of which 206 have been notified.

Of the five formal approvals granted today, four are for setting up IT/ITES zones by Brigade Enterprises in Karnataka, Wellgrow Buildcon and Sunwise Properties in Haryana and Smart City (Kochi) Infrastructure in Kerala.

The in-principle approval granted to Smart City (Kochi) Infrastructure was converted to formal nod today.

Also, a biotech project in Andhra Pradesh by Vivo Bio Tech Ltd was given formal approval. An engineering SEZ in Maharashtra by the Maharashtra Industrial Development Corporation (MIDC) was granted the in-principle approval, an official release said here today.

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Paswan asks PM to re-classify steel as an essential commodity

New Delhi (PTI): Peeved at steel producers repeatedly hiking prices, Steel Minister Ram Vilas Paswan has asked Prime Minister Manmohan Singh to re-classify the alloy as an essential commodity, withdrawing DEPB benefits from them and constituting a regulator for the sector.

"In the three month period since December 2007, steel prices have risen by 20-24 per cent...possibilities of setting up a regulatory mechanism for steel and its inputs and re-classifying steel as an essential commodity may be considered by the government," Paswan said in a letter to the Prime Minister.

Suggesting a series of fiscal measures against the steel producers for hiking prices of their produce despite repeated appeals, Paswan said the Centre should withdraw export incentives offered to them in the form of Duty Entitlement Pass Book (DEPB) scheme, which if withdrawn would hit the the bottom lines of major steel producers by about Rs 600 crore.

The DEPB for the steel makers is slated to end this month.

"The net savings on account of DEPB withdrawal is estimated at around Rs 593 crore. Withdrawal of DEPB benefits will make exports less attractive, even though in most cases, export realisation will continue to be more than the earnings from domestic sales," Paswan said adding that his Ministry made this recommendation to disincentivise steel exports.

The steel makers currently enjoy DEPB benefits of 5 per cent in galvanised products, 4 per cent in billets, 6 per cent in TMT bars and 4 per cent in hot rolled coils.

Paswan pointed out that rise in prices of long steel products have increased 24 per cent, while those of flats rose between 20-22 per cent.

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US wants FDA inspectors stationed in India

Washington: The Bush administration has said it wants officials from its Food and Drug Administration (FDA) to be stationed in India to check the safety of food products bound for the US, and has started initiating talks with New Delhi on the issue.

The regulatory body's presence in India was necessary given the fact that more FDA approvals are coming out of India than any other country in the world other than the US, Secretary of Health and Human Services Mike Leavitt said here, adding "It won't happen overnite. But it is a high priority."

Speaking at a meeting hosted the United States India Business Council, Leavitt, who was recently on a five-day visit to India, announced that the FDA is to begin carrying out checks on Chinese food products.

He said the FDA will create eight new positions at US diplomatic missions throughout China over the next two years which will be contingent upon final approval from Beijing.

"We have also initiated conversations with the Indian Government on the need to have similar kinds of officers in India," Leavitt said.

"We did not reach agreement; we did not seek an agreement; we are not actively negotiating. But we did make clear that part of our plan in the future would be to work toward that..." the senior administration official said.

He said product-safety problem is the natural consequence of a maturing of the global marketplace and a direct reflection of the profound growth in the amount of trade between nations.

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Ministry seeks extension of low interest to exporters

New Delhi, March 7 The Department of Commerce is pitching for continuation of reduced export interest rate of seven per cent particularly to traditional segments such as marine products, textiles, handicrafts and leather for another year beyond end-March 2008 as this would provide some succour to them.

Talking on the demands of exporters and the disgruntlement being felt by them in the Budget 2008-09 which has bypassed their core concern, the Commerce Secretary, Mr Gopal K. Pillai, said that, as it is, many costs of manufacturer-exporters had gone up such as power and freight, over and above the rupee appreciation.

Plea for reliefs

He said that the department is pleading for reliefs such as reduced interest rate and enhancement in the rates of Duty Entitlement Pass Book (DEPB) to employment-intensive export sectors only, where if the margin is reduced to meagre level, the exporters could not be left with any funds for further investment and expansion of his operation.

For this, “we are committed to the conviction that no taxes are exported”. He said that where the margin is thin at five per cent in exports, if tax burden of 7-8 per cent is super-imposed, “they get wiped out”.

Trade facilitation

Mr Pillai said that is why the Commerce Ministry is focussing more and more on trade facilitation particularly in the light of the fact that some of the export promotion schemes might get axed over the years.

Meanwhile, at least refund or reimbursement of taxes borne by the exporters could be expedited by way of some relief to exporters, he said.

With the modifications or annual supplement to the Foreign Trade Policy (FTP) on the anvil, Mr Pillai said a lot of attention would be on whittling down archaic rules to bring about procedural simplification.

For instance, he said, “If you import through one port, you have to export through that port only. Otherwise you have to get clearance from the port of import for effecting export. When electronic data interchange (EDI) is already there in 32 ports, whether one imports through Kandla and exports through JNPT, why do you want the exporters to go all the way to get a no objection certificate from the port of import?”

He said that just in the case of self-certification provided to the special economic zones (SEZ), exporters with past performance and enjoying the status-holder position could be allowed the self-certification so that the basic trust is built with the exporting community.

Export paradox

Asked about the paradox of exports maintaining high momentum despite the adverse effect of an appreciating rupee on exporters’ margins, Mr Pillai said that some sectors such as petroleum product exports had shown a very high growth and this has reflected in high import growth rate too. He said that unless traditional exports with labour-intensive operations do well, export industry would continue to wrestle with problems.

However, he said, by next year EDI would be fully in place and the advent of a general goods and services tax (GST) by 2010 would help exporters in a big way along with the gradual improvement in physical infrastructure.

Denotification status

To a specific query about the status of denotification sought by the Goa Government on the three notified SEZs in that State, Mr Pillai said the Law Ministry has already opined about compensation to the developers and “we will now initiate the dialogue with the State Government as to whether it is prepared to face this or unnecessarily add to litigation?”

He said the next meeting of Board of Approval for SEZs is scheduled for March 20.

Mr Pillai is hopeful of exports fetching $155 billion this fiscal against the target of $160 billion.

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Forex reserves cross $300 b

Mumbai, March 7 The total foreign exchange reserves crossed the $300 billion mark for the first time, with an accretion for the third week in a row.

For the week ended February 29, the reserves increased by $6.625 billion to touch $301.235 billion, according to the Reserve Bank of India.

In the previous week, the foreign currency assets had increased by $1.754 billion to touch $294.610 billion.

Mr R.V. S. Sridhar, Vice-President, Treasury, Axis Bank, said the increase would include the value of the pound and euro, which gained against the dollar. The price of gold had also gone up during the same week.

As per the RBI’s weekly statistical supplement, foreign currency assets increased by $6.261 billion to touch $291.250 billion. Foreign currency assets, as expressed in dollars, include the effect of appreciation or depreciation in non-US currencies (euro, sterling and yen) held in reserves.

The total FII inflows into the equity market for the week under consideration were Rs 1,322.6 crore. Though the rupee was flat against the dollar, the euro had touched a record high of $1.5238 during the week, which also may be reflected in the value of the forex reserves.

According to a senior official from a public sector bank, the inflows could have increased not only because of dollar purchases made by the RBI but also because of inflows into equity market, inward remittances and foreign currency coming in for industrial and infrastructure projects. After remaining unchanged for three weeks, the gold reserves moved up by $359 million to touch $9.558 billion. SDRs remained unchanged and the reserve position in the IMF increased by $5 million to touch $427 million.

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Government hikes rice export price, asks traders to report wheat purchases

The government has raised the minimum export price for non-basmati rice to $650 per tonne (fob) from $500, in a move to slow down exports.

The Directorate General of Foreign Trade (DGFT), under the commerce ministry, said in a notification dated 5 March on its website that the floor export price of non-basmati rice has been raised to Rs26,000 ($650) a tonne.

The step is aimed at discouraging rice exports and rein in rising domestic prices.

The government had banned exports of all non-basmati rice on October 9, but relaxed it later following protests by traders and allowed sales at a floor price of $425 a tonne.

In December, the government raised the floor price for exports to $500.

The DGFT notification said both basmati and non-basmati rice would now be exported only through four ports - Kandla and Mumbai on the west coast and Kakinada and Kolkata on the east coast.

The government also fixed a minimum export price for basmati rice to the Russian Federation at Rs36,000 ($900) per tonne.

In a bid to check hoarding amidst a global fall in foodgrain supplies, the government also asked traders to report purchases of new season wheat to central and state government officials.

Traders have to report purchases of over 10,000 tonnes of wheat to state governments and those above 25,000 tonnes to the union ministry, a government statement said.

Higher purchases by trading firms are hampering government's efforts to shore up its buffer stocks. The Food Corp of India could procure only 11.5 million tonnes of wheat in 2007, forcing the government to import 1.8 million tonnes.

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US to review shrimp anti-dumping duty

The US Department of Commerce has announced the preliminary determination of the second anti-dumping duty review against certain frozen freshwater shrimp from India along with four other countries such as Thailand, Brazil, Vietnam and Ecuador.

Anti-dumping duty in the case of Indian companies such as Devi Sea Foods has now been pegged at 0.70 per cent and Falcon Marine Exports at 1.69 per cent.

However, the real achievement has been in bringing down the specific all-India average rate to 1.09 per cent, down from 7.22 per cent which was prevailing earlier, the Seafood Exporters Association of India (SEAI) said. The 121 Indian exporters who have not responded to the query from the US Department have been imposed a duty of 110.90 per cent.

‘Damage done’

At the same time, the WTO panel ruled in favour of India’s complaint that the US requirement of 100 per cent continuous bonds on shrimp imports is illegal. Earlier, the court had ruled on the same issue in favour of Thailand. The ruling also confirmed the preliminary findings of a dispute settlement panel last October against such a practice in Ecuador.

Although this continues, the unbroken string of legal victories both in the US and the WTO over shrimp tariffs and continuous bonds, the SEAI said that much of the damage to Indian exporters has already been done. The number of active Indian shrimp exporters to the US markets has come down from 208 in 2004 to 68 currently.

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Exporters sulk as FM denies more sops

NEW DELHI: Exporters expecting bailout sops in the Budget to help them cope with the rising rupee are disappointed. While there are expectations that some incentives like an extension of interest subvention for certain sectors could be notified later, exporters feel the Budget has not done anything to boost their sagging spirits.

FIEO president Ganesh Kumar Gupta said problems faced by exporters due to the appreciating rupee and stagnating traditional markets were not addressed by the Budget at all.

“The proposal to provide zero rating of exports through refund of state taxes and local levies, exemption from fringe benefit tax (FBT) on genuine business expenses and exemption from all service taxes on services used during the course of exports to provide a level-playing field to Indian exporters have not been considered,” he said.

Delhi Exporters Association president S P Agarwal doubted finance minister P Chidambaram’s claim that Rs 8,000 crore has been given to exporters in three tranches to help them come out of their present crisis.

“We have no idea where he has spent the Rs 8,000 crore he mentioned. We have heard only of a package of Rs 1,400 crore out of which Rs 600 crore was a refund of dues to exporters for their deemed exports. The remaining Rs 800 crore was given in the form of increment in the drawback rate with retrospective effect from April 1. This has not yet been fully given to exporters,” he said.

Mr Agarwal also brushed aside Mr Chidambaram’s argument that the interest cost of sterilisation through market stabilisation bonds estimated at Rs 8,351 crore for the year was, in a way, subsidy to exporters.

“We cannot make any sense out of this claim,” he said. He added that the government should have created an exchange contingency stabilisation fund to give some cushion to exporters from the fluctuating value of the rupee. The rupee has appreciated by about 14% against the dollar in the last calendar year rendering exports with low import content incompetitive in the global market.

FIEO pointed out that the FM had also ignored the demand for forming an export marketing fund for the small and medium sector which was hit most by the drying up of export orders.

Although the textiles sector did get some sops in the Budget, exporters said it was not enough. Increase in allocation for textiles upgradation fund and integrated textiles park besides mega clusters schemes for handloom and handicrafts would not provide immediate support to textiles sector which is need of the hour, exporters said.

“Zero import duty and excise duty on machines could have encouraged fresh investment as also mordernisation, both critical for improving competitiveness of this sector ,” Apparel Export Promotion Council (AEPC) chairman Rakesh Vaid said.

The only silver lining for the export sector is the gradual move towards GST by reducing excise duty from 16% to 14% and few concessions given to sports goods and gem and jewellery sector through reduced Customs duty on their inputs.

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WTO strikes down US import curbs on Indian seafood

KOCHI: Indian seafood exporters can heave a sigh of relief as the World Trade Organisation (WTO) has ruled against imposition of additional customs bond by the US on Indian seafood products.

The customs bond is a surety guaranteeing that the importer will abide by all laws and regulations governing the import of merchandise into the US.

A dispute settlement panel of WTO has accepted India's plea against imposition of additional 100 percent customs bonds by the US on Indian shrimp imports to that country, an official of the Seafood Exporters Association of India told IANS Wednesday.

"The decision came on Feb 29. Another reason for cheer is that the anti-dumping duty on seafood products from India, which was raised to 10.54 percent in August 2004, should be lowered to 1.09 percent," the official said.

The first positive development in the case came in December 2006 when the US Court of International Trade gave a preliminary ruling that the additional bond imposed on shrimp imports from India was contrary to the law, he said.

"Consequent to the tough new rules imposed by the US against Indian shrimp products, the number of seafood exporters which stood at 280 then had dwindled to a mere 68 by the end of this January," the official said.

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Nath meets PM over proposals related to relief for exporters

NEW DELHI: With finance minister P Chidambaram giving exporters the cold shoulder in the Budget—apart from the meagre sops for select sectors—commerce minister Kamal Nath met the prime minister yet again on Tuesday to urge him to address the problems being faced by exporters due to rupee’s appreciation. A number of proposals related to relief for exporters are pending with the finance ministry.

Mr Nath, however, said he had no reservations on the loan waiver package for farmers announced in the Budget and has ‘congratulated’ the FM for this measure. Speaking to reporters on Tuesday, Mr Nath said, “Of course, I welcome it (the package). But we must formulate a mechanism for its execution, which the FM is doing”.

While the Budget might not have delivered the goods to exporters, the commerce department is hopeful of appropriate government intervention outside it. “It is an ongoing process. With the rupee’s appreciation, Indian exporters are feeling concerned about the lack of competitiveness in the global market,” he said.

The minister said his department was concerned about the plight of exporters, especially the ones in labour-intensive sectors. According to estimates by the commerce department, the over-13% rise in the value of rupee against the dollar would impact about 2,75,000 jobs in labour-intensive sectors.

The commerce department is disappointed that none of the recommendations of the Krishamurthy and Rangachary committees, set up by the prime minister to give suggestions on bailing out exporters, were followed by the FM in his Budget.

The committees had recommended incentives for the industry to encourage manufacturing and exports and suggested special measures for labour-intensive sectors like textile, gems & jewellery, handicraft, leather and marine products. Exports from these sectors have either stagnated or gone down during recent months.

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No tax exemption on export profits

New Delhi, March 3 The Union Finance Minister, Mr P. Chidambaram, on Monday turned down FICCI’s plea to restore temporarily the tax exemption on export profits to offset the adverse effect of appreciating rupee against the US dollar.

In his post-Budget interaction with industry associations, Mr Chidambaram said that Section 80HHC, an earlier provision in income tax law that provided tax exemption on export profits, could not be restored as it was WTO incompatible.

“I disagree with your suggestion that 80HHC should be restored. Section 80HHC was abolished in 2004, as it was WTO incompatible. All profits must be taxed. There is no reason why profits should not be taxed. We are not taxing losses. The effective tax rate is only 20.6 per cent. You get to retain the balance,” Mr Chidambaram said. Stating that the export sector needed “deeper look,” the FICCI President, Mr Rajeev Chandrasekhar, suggested that the Government must waive tax on all services used by exporters, restore 80HHC temporarily and do away with MAT for exporters for two years.

He said that the exporting fraternity needs more assistance.

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January exports post 20.47% growth

New Delhi, March 3; Even as exporters complain about the adverse impact of the appreciating rupee and lack of supportive measures in the Union Budget 2008-09, the country’s exports for January 2008 clocked a growth of 20.47 per cent and cumulative export growth during the first 10 months of the fiscal at 21.62 per cent in dollar terms.

But in rupee terms, export growth in January 2008 was seven per cent and cumulatively it was 7.66 per cent which is the real crunch confronting exporters in general and in labour-intensive sectors in particular.

Provisional figures of foreign trade data released by the Department of Commerce shows that the country’s exports, in January 2008 valued at $13.14 billion, was 20.47 per cent higher than the level of $10.9 billion during January 2007.

Cumulatively, value of exports for April 2007 to January 2008 at $124.19 billion was 21.62 per cent higher than $102.11 billion during the corresponding months of the previous fiscal.
Imports

Imports, on the other hand, during January at $22.5 billion were 63.57 per cent higher than the level of such imports valued at $13.75 billion in January 2007. Cumulatively too, India’s imports during the first 10 months of the current fiscal at $191.60 billion showed a growth of 29.63 per cent over the level of $147.81 billion during the corresponding period of the previous fiscal.

Oil imports during January 2008 at $7.7 billion were 60.81 per cent higher than oil imports of $4.79 billion in January 2007. Cumulatively, oil imports during the first 10 months of the current fiscal at $57 billion were 16.49 per cent higher than the oil imports of $48.9 billion in the corresponding period of the previous fiscal.

Non-oil imports during January 2008 were estimated at $14.79 billion, against $8.96 billion in January 2007, showing a hefty growth of 65 per cent. Cumulatively too, non-oil imports during the first 10 months of the current fiscal amounted to $134.58 billion which were 376.13 per cent higher than the level of such imports at $98.86n billion in April-January 2007.

As a result of high export growth and a higher import growth the country’s trade deficit during the first 10 months of the current fiscal zoomed to $67.41 billion which was higher than the deficit of $45.70 billion during April- January 2007.

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Steel users brace for price hike

Calcutta, March 2: Steel companies are gearing up to raise prices by Rs 2,000-3,000 a tonne this week after the budget left untouched the levy on iron ore export.

They will meet steel minister Ram Vilas Paswan tomorrow and present their case.

Paswan had promised them that he would look into the increasing prices of raw materials such as coke and iron ore.

However, neither the customs duty on coking coal was cut nor the export duty on iron ore increased in the budget, disappointing the industry which has seen input costs rising Rs 7,000 a tonne from October till date.

The companies had passed on an increase of Rs 2,500 a tonne to the consumer last month, before Paswan prevailed upon them to roll back prices by Rs 500 a tonne on selected items.

“He had assured us to take up our case with the commerce and finance ministry. But nothing happened. We have to increase prices to cover losses,” a steel industry executive said.

The domestic steel price is now hovering at $800, or Rs 32,000 a tonne. However, the landed price of imported steel has touched $900, or Rs 36,000 tonne.

“Bookings are taking place at $900 a tonne. This may actually go up to $950. The price differential between imported and domestic steel is widening,” an industry observer said.

Last year, the finance minister had imposed a Rs 300-per-tonne duty to discourage iron ore export, but it had no impact because the exporters, earning a profit of Rs 2,000 a tonne, were in a position to pay the duty.

This year the industry was lobbying with the government for raising the duty, if not a ban on export.

Tata group chairman Ratan Tata, who also heads the investment commission, recently wrote to Prime Minister Manmohan Singh urging a halt in export.

The budget did not address the issue, while the customs duty on coke, which is in short supply, was kept intact at 5 per cent. Prices of coking coal, used for making metallurgical coke by the industry, has risen 200 per cent.

The decision to raise prices is coming a month ahead of new global contracts for iron ore where miners such as Vale of Brazil will charge 65 per cent more than last year.

Domestic producers have already said they would effect a Rs 4,000-5,000-per-tonne price hike in April. It now looks that there will be a round of price hikes in this month itself.

The UPA government is trying hard to curb inflation as the general election will be held next year.

The industry was expecting a government intervention in iron ore given its high prices. Coking coal is mostly imported and, therefore, not much can be done but a cut in duty.

“If the government wants to reduce steel price, it should ensure raw material prices are kept in control. You cannot fix the output price, while letting the market control the input prices,” industry officials said.

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Textile industry wants a lot more

NEW DELHI. While textile units expected special attention from the FM initiatives announced in the Budget are seen by the industry as ‘inadequate’ to tide over the crisis faced on account of rupee appreciation. Industry leaders termed the Budget as “unfortunate” for the economy in general and exports in particular.

“The idea of inclusive growth will remain only on paper unless concrete measures are taken to encourage industries like textiles and clothing, which have the potential to deliver inclusive growth,” Confederation of Indian Textile Industry (CITI) chairman PD Patodia said. The Budget has provided relief to makers of man-made fabrics by scrapping the 1% national calamity contingency duty (NCCD). The finance minister has proposed increase in allocation for the two existing flagship programmes of the textile ministry. The scheme for integrated textile parks (SITP) would get Rs 450 crore in 2008-09 while the technology upgradation fund (TUF) would get Rs 1,090 crore.

The FM has also proposed an outlay of Rs 420 crore for the development of six textile mega clusters in Varanasi, Sibsagar, Bhiwandi, Erode, Narsapur and Moradabad. Initially, the Centre would allocate Rs 100 crore for this scheme in the current fiscal.

Industry associations termed the allocations insufficient. “Allocation (under TUFS) is insufficient as delay in disbursement has been a serious problem and there is a huge backlog,” Southern India Mills’ Association (SIMA) chairman KV Srinivasan said. Chairman of Tirupur Exporters’ Association (TEA) A Sakthivel said that the industry is disappointed over the silence on issues of labour reforms and refunding of hedging cost borne by exporters.

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Budget: Textiles lose colour this time

Never has the Union Budget evoked such disappointment for the rupee-scarred textile and garment exporters. Says A Sakthivel, president, Tirupur Exporters Association (TEA): “We sought reduction of interest rates, exemption of service and fringe benefit tax, refund of state levies and taxes and refund of hedging cost. But none of these was fulfilled.”

Agrees V Kumar, president of the Karur Textile Manufacturer Exporters’ Association: “The FM has not addressed our core concerns. There is practically little to help us overcome internal crises such as fluctuating yarn price and cotton arrivals and external issues such as the rupee appreciation that is affecting the exports badly.”

Even the increased outlay on the Technological Upgradation Fund Scheme (TUFS) from Rs 911 crore to Rs 1,090 crore hasn’t helped matters. There was a backlog of over Rs 600 crore from 2007-08 and the requirements for 2008-09 against existing loans would amount to another Rs 1,100 crore.

However, a welcoming feature for Tamil Nadu’s textile industry is the proposal for a powerloom cluster project in Erode at a cost of Rs 70 crore.

Says MS Mathivanan, chairman, Powerloom Development and Export Promotion Council, “The cluster project would help in product and design development and train manpower for the powerloom units.”

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Upset with Budget, Nath to meet PM

Disappointed with the Budget proposals relating to the export sector, Commerce and Industry Minister Kamal Nath will soon meet Prime Minister Manmohan Singh and seek fiscal relief for exporters distressed by rupee appreciation.

“None of the recommendations of both the Rangarajan and the Krishnamurthy Committee have been considered in the Budget. We are very disappointed and the commerce minister will meet the PM in the next few days,” a senior official said.

However, when asked whether he was happy with the Budget proposals, Nath said, “I am happy with the non-commerce ministry part of it (the Budget)”.

As to how he would provide relief to the exporters, Nath said the “process will go on”. He said the annual review of the Foreign Trade Policy, due by the month end, would try and address many of the concerns of the exporters.

The two expert committees appointed by the prime minister are believed to have recommended several fiscal and other measures to mitigate the trouble of exporters especially in the labour-oriented sectors of textile, handicraft, leather and marine products.

According to the pre-Budget Economic Survey released last week, growth in textile exports for the April-September period of the current fiscal dropped sharply to a mere 1.2 per cent from 33.5 per cent in the same period last year. Handicraft exports have shown a big negative growth of 14.5 per cent against a positive 5.2 per cent a year ago.

“The Budget has not addressed concerns of the labour-intensive sectors of textile, handicraft, leather and marine products, which are the worst hit by the rupee rise,” the official said.

The Federation of Indian Export Organisations had said the Budget had failed to address the challenges of a rising rupee and waning competitiveness of exporters in global markets.

“The proposals for refund of state and local levies, exemption from FBT on business expenses and from specific service taxes have not been considered,” FIEO President Ganesh Kumar Gupta had said.

According to commerce ministry estimates, the over 13 per cent rise in the value of the domestic currency against the dollar would impact about 275,000 jobs in labour intensive sectors.

The rupee appreciated by 9.8 per cent against the US dollar between April 3, 2007 and January 16, 2008.

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WTO rules against US taxes on Thai shrimp

GENEVA: A US tax on shrimp imports from Thailand is breaking international trade rules, the World Trade Organization has found on Friday.

Governments impose antidumping taxes when they believe their markets are being flooded with below-cost imports.

Thailand says the duties threaten its shrimp industry. Washington defends how it calculates the fees. But the WTO has consistently ruled that the US excessively taxes foreign goods suspected of dumping.

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EOUs protest hike in DTA sales duty

NEW DELHI: The Union Budget has dealt yet another blow to 100% export-orient units (EOUs).

Not only is the Budget silent on the issue of removing the sunset clause on the tax sops given to EOUs, which kicks in next year, it has doubled the Customs duty on sale of goods from EOUs to domestic tariff area (DTA) from 25% to 50% in addition to the 100% additional Customs duties paid on such sales.

According to export promotion council for EOUs and SEZ Units (EPCES) chairman T Vasu, non-resolution of the issue of removal of the sunset clause under Section 10B of the Income Tax Act was disappointing.

The V Krishnamurthy committee report’s suggestion that it should be at least extended for one year was not followed.
“If the sunset clause is not removed, no exporter will like to operate under EOU scheme,” Mr Vasu said, adding that the scheme, which has given a big boost to manufacturing activities, would collapse.

EOU exporters are also disappointed that while exports from the sector have also been affected adversely due to the rupee appreciation, the package announced to exporters on this account had not been extended to EOUs.

They feel that EOUs, which have exhausted their tax concessions, were as vulnerable as other exporters and thus there was no reason to exclude them from the package.

The doubling of Customs duty on sale of goods from EOU to DTA, which comes close on the heels of imposition of a minimum alternate tax of 12.5% in the last Budget, has also upset EOUs.

“There was no need for the hike as EOUs were in any case paying additional 100% duty, which is equivalent to full central excise duty. Moreover, the MAT introduced last year has also not been removed,” Mr Vasu said.

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India to prune negative list under SAARC trade : Nath

NEW DELHI: India will bring down items in the negative list with regard to the least developed countries -- Bangladesh, Nepal, Bhutan and Maldives -- in the SAARC region to around 500 from 744, as it aims to expand trade in goods in the region.

"India has unilaterally decided to reduce the negative list. We would be in a position to notify the revised negative list within the next few months," Commerce and Industry Minister Kamal Nath told reporters here.

Speaking at the third meeting of the SAFTA ministerial council here, Nath said reviewing of the negative list and enlarging the scope for further trade cooperation were the key elements in enhancing trade within the SAARC region.

He said the other non least developed countries should also consider reviewing the negative list with respect to the LDCs.

India has already reduced imports duty to zero on all items other than those in the negative list for the LDCs with effect from January 1 this year.

He further said the regional study on trade in services has being completed giving the government an opportunity for an effective services agreements among SAARC countries.

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Rupee-hit exporters left guessing

Exporters expecting bail-out sops in the Budget to help them cope with the rising rupee are disappointed. While there are expectations that some incentives like an extension of interest subvention for certain sectors could be notified later, exporters feel that the budget has not done anything to boost their sagging spirits.

FIEO president Ganesh Kumar Gupta said problems faced by exporters due to the appreciating rupee and stagnating traditional markets were not addressed by the Budget at all. "The proposal to provide zero rating of exports through refund of state taxes and local levies, exemption from fringe benefit tax (FBT) on genuine business expenses and exemption from all service taxes on services used during the course of exports to provide a level-playing field to Indian exporters have not been considered.

Delhi Exporters Association president S P Agarwal questioned finance minister P Chidambaram's claim that Rs 8,000 crore has been given to exporters in three tranches to help them come out of their present crisis. "We have no idea where he has spent the Rs 8,000 crore he mentioned. We have heard only of a package of Rs 1,400 crore out of which Rs 600 crore was a refund of dues to exporters for their deemed exports. The remaining Rs 800 crore was given in the form of increment in the drawback rate with retrospective effect from April 1. This has not yet been fully given to exporters," he said.

Mr Agarwal also brushed aside Mr Chidambaram's argument that the interest cost of sterilisation through market stabilisation bonds estimated at Rs 8,351 crore for the year was, in a way, subsidy to exporters. "We cannot make any sense out of this claim," he said.

He added that the government should have created an exchange contingency stabilisation fund to give some cushion to exporters from the fluctuating value of the rupee. The rupee appreciated by about 14% against the dollar in the last calendar year rendering exports with low import content uncompetitive in the global market. FIEO pointed out that the FM had also ignored the demand for forming an export marketing fund for the small and medium sector which was hit most by the drying up of export orders.

Although the textiles sector did get some sops in the budget, exporters say that it was not enough. Increase in allocation for textiles upgradation fund and integrated textiles park besides mega clusters schemes for handloom and handicrafts would not provide immediate support to textiles sector which is need of the hour, exporters feel. "Zero import duty and excise duty on machines could have encouraged fresh investment as also mordernisation, both critical for improving competitiveness of this sector," AEPC chairman Rakesh Vaid said.

The only silver lining for the export sector is the gradual move towards GST by reducing excise duty from 16% to 14% and few concessions given to sports goods and gem and jewellery sector through reduced customs duty on their inputs.

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Metals industry welcomes import duty cut

NEW DELHI: The Indian govermnent abolished import duties on scrap metal and increased an export duty on chrome ore in its budget on Friday, moves which local industry said would provide some relief from soaring raw material prices.

A 5 percent duty on iron, steel melting scrap and aluminium scrap was removed in the government's budget for 2008/09, and the general rate of excise duty was cut to 14 percent from 16 percent.

"The cost of non-ferrous metals costs has gone up, and these moves will also give some relief to the working capital," said Surendra Mardia, president of the Bombay Metal Exchange, whose members include metal dealers, processors and fabricators.

The international prices of copper has more than doubled over the past one year, and aluminium has gone up by about one-third. "It will definitely help as we have no choice but to import melting scrap for stainless steel production," said N C Mathur, a director of Jindal Stainless.

The cost of steel scrap, which is a key raw material for special steels, alloys and stainless steel, has nearly doubled over the last one year to $500 per tonne, Mathur said. Pawan Burde, metals and mining analyst, Angel Broking, said the removal of the duty would benefit small firms, as they could cut their dependence on iron ore.

Further helping domestic-focused firms, the export duty on chromium ores was raised to to 3,000 rupees ($75) per tonne from 2,000 rupees. India exported around 1.3 million tonnes of chrome ore a year, Mathur said. Chrome ore is used in making ferrochrome, which in turn is used to make stainless steel.

India's metal manufacturing industry have been lobbying for a halt to exports of raw materials such as iron ore and chrome, arguing they threatened future supplies for local firms. There was no change to export duties of 300 rupees per tonne on high grade iron ore and 50 rupees per tonne on low grade ore, which were introduced in last year's budget.

Steel makers have been lobbying for raising the export duty on iron ore. "That hasn't happened and it's not good for the industry," said Nitin Johari, chief financial officer of Bhushan Steel and Strips Ltd. For exporters, it was small comfort.

"The finance minister hasn't spoken about iron ore at all. So, I presume the current duty continues, though we had requested the government to withdraw it as there's no case for a duty," said Rahul Baldota, president of the Federation of Indian Mineral Industries.

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India to miss export target in 2007-08: Chidambaram

New Delhi, Feb 29 (IANS) The government Friday said that the export target of $160 billion in 2007-08 might not be achieved due to the rising rupee against the dollar in the past year. Finance Minister P. Chidambaram, while presenting the national budget for 2008-09 at the Lok Sabha Friday, said the government would provide relief to exporters adversely hit by appreciation of the rupee against the dollar.

“Merchandise exports have come under some pressure due to the appreciation of the rupee and may fall just short of the target of $160 billion, although the growth rate was strong at 21.8 percent during April-Dec 2007-08,” he said.

To fight the problem the exporters, who also experienced huge job losses, they have been given relief packages amounting to Rs.80 billion in three phases, the minister said.

“I may note that the interest cost of sterilisation through market stabilisation bonds (MSS), estimated at Rs.8,351 crore (Rs.83.51 billion) for the whole year is, in a sense, subsidy to the export sector,” Chidambaram said.

“Government is sensitive to the needs of the export sector and will continue to respond sympathetically as the situation demands.”

Shortly after his budget speech, Chidambaram said over the Lok Sabha television channel that exporters should look at expanding the number of countries they do business with in order to reduce the impact of possible recession in the United States.

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Nothing for exporters except sympathy: EEPC

Kolkata, Feb. 29 Reacting to the Union Budget proposals, Mr Rakesh Shah, national chairman of Engineering Export Promotion Council (EEPC) said here today that the Budget had nothing for exporters except “sympathy”.

He said the Budget has completely bypassed the urgent requirements of engineering exporters.

Talking to Business Line, he said the proposals carried no major policy initiative to address the sharp slowing down of exports – from 25.3 per cent growth in 200607 to 7.7 per cent (in rupee terms) in the first 9 months of the current fiscal.

He said exporters had fervently pleaded for some fundamental policy initiatives to correct the imbalances in the economy that had led to declining fortunes of the exporting community of late. He, however, welcomed the abolition of import duty on steel melting and aluminium as well as lowering of Cenvat rate to 14 per cent.
No ‘exemption scheme’

He said the exporters were hoping that the service tax refund benefits for 13 services would be converted into an ‘exemption scheme’, as promised by the Government.

He said expectations over inclusion of service tax on foreign commission agents, which was the most important post-production service tax component, in the refund/exemption mechanism has been belied.

According to him, while the export duty on chrome ore has been increased, “no such duty has been imposed on export iron ore, which has been the root cause for the sharp escalation of steel prices in the country.”

He felt while the finance minister mentioned about the monopolistic stuation in the steel and cement industries in the country, “no policy pronouncement has been made to usher in competitive conditions, especially in the steel sector, such as imposition of an export duty on steel exports to stabilize domestic steel prices.
‘Inflationary’

According to Mr M.F. Vohra, president of All India Rubber Industries Association (AIRIA), the budget may encourage inflation. Pointing out that no specific relief has been given to the rubber goods industry, he said there was no concession on the inverted duty structure on natural rubber nor any duty reduction for synthetic rubber.

“On the other hand, there is enhancement of duty on crude sulphur.”

The feel good factors, according to him, were steps to further develop the it is, allocation of Rs 19.41 crore on R&D for development of rubber plantations, slashing of Cenvat from 16 per cent to 14 per cent etc.

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Textile industry overlooked

COIMBATORE: The textile industry is upset that the Union Budget has no relief measures to overcome the crisis it faced.

Prem Malik, Chairman, Cotton Textile Export Promotion Council, said the allocation for the Technology Upgradation Fund Scheme (TUFS), the Integrated Textile Park Scheme, and the cluster proposals were all investment-oriented. “If the industry is not doing well, investments will not come in,” he said.

The Confederation of Indian Textile Industry has also expressed its disappointment. According to a release from the confederation, reduction of customs and excise duties on fibres and capital goods, a mechanism to refund the State-level duties to exporters of labour-intensive products and a moratorium on repayment of principal amounts against term loans taken by the textile units would have helped revive the “crisis-ridden textiles and clothing industry.”

On the allocation of Rs. 1,090 crore for the TUF Scheme, the confederation Chairman, P. D. Patodia, said this amount would not be sufficient to service the existing TUFS loans, let alone new ones.

There was a backlog of over Rs. 600 crore from 2007-08 and the requirements for 2008-09 against existing loans would amount to another Rs. 1,100 crore.

At present, there was a delay of one year in disbursing TUFS assistance and with the “meagre allocation” made in the budget for the next financial year, the delay would only increase. Hence, the Centre should increase the TUFS allocation substantially, he said.

The Southern India Mills’ Association Chairman, K. V. Srinivasan, said the textile and clothing sector was overlooked in the budget.

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India : Exporters face disappointment with budget proposals - GEA

Reacting sharply to the Budget proposals, Garments Exporters Association (GEA) has pointed out that the exporting community feels being left in the lurch as there is hardly anything new in the Budget proposals that will lift the sagging morale of our exporting community which is facing serious crisis because of global slow down and sharp and persistent appreciation in the value of rupee, seriously eroding the competitiveness and profit margin of Exporters.

The Finance Minister, conveniently ignoring the legitimate expectations and needs of the Garment Exporters, has also failed to restore 100% exemption to export earnings under Section 80 HHC of Income Tax Act. He has also failed provide the necessary exemption from Service Tax, Fringe Benefit Tax and other Central and State Levies.

Further Garments Exporters Association said that budget proposals are thus a let down for the garment exporters who were hoping for a dream budget from the Finance Minister, in view of various recommendations of Ministry of Commerce and Industry, Ministry of Textiles and even the Prime Minister’s Economic Advisory Council to provide necessary fiscal and commercial relief to the Textile Industry to help them to overcome the present crisis.

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