Import duty on power equipment may not make much difference for domestic manufacturers

COIMBATORE: The government's decision to impose a 21% import duty on power equipment may not mean much for local manufacturers such as Bharat Heavy Electricals (BHEL). With the order inflow presenting a bigger challenge and the threat of Chinese imports fading due to the sharp depreciation of the rupee against the yuan, local makers have more serious issues to contend with than worry about cheap imports, industry observers said.

"Import duty on BTG (boiler turbine generator used in power plants) equipment is a non-issue now for BHEL and L&T (Larsen&Toubro)," analysts at Nomura Equity Research said. The government has approved a 21% import duty on power equipment (comprising 5% basic customs duty, 12% counter-veiling duty and 4% special additional duty). Earlier, equipment for mega power projects (higher than 1000 MW) were exempt from the duty, while coal fired projects of less than 1000 MW attracted a 5% customs duty.

"The order inflow in itself is a much bigger problem for the sector right now and even for the next 2-3 years," analysts said. "The sector first needs to come out of these issues and then look for other catalysts." Moreover, competition from Chinese manufacturers is already on the decline due to the sharp depreciation of the rupee. The rupee has declined 26% against the yuan in the last one year.

While public-sector orders as well as expected UMPP (ultra mega power projects) orders have a mandatory domestic manufacturing clause, the private sector would not bring major orders, observers said. The proposed duty could be prospective in nature and will not affect the already-placed orders, they said.

But even a retrospective implementation of the import duty is unlikely to benefit major players such as BHEL meaningfully since most of these projects have reached an advanced stage of construction. "Project developers are unlikely to cancel their orders to Chinese vendors at this stage," observers said.

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EEPC seeks Technology Upgradation Fund Scheme

The Engineering Export Promotion Council (EEPC) has suggested the formulation of a Technology Upgradation Fund Scheme (TUFS) for the engineering sector. It feels this will help India achieve the target of doubling exports in three years.

The department of commerce is coming up with a strategy to double total exports in the next three years. The engineering sector (comprising 60-65 per cent SMEs) has been set an export target of $92 billion by 2013-14, up from an estimated $43 billion in 2010-11. To achieve the target, it has asked EEPC to identify major initiatives required in the Foreign Trade Policy.

The convenor of EEPC’s hand tools panel, Sharad Aggarwal, told Business Standard, “After a meeting on held December 27 with the department of commerce, EEPC India feels that the formulation of a TUF scheme will go a long way in not only helping engineering exports reach $92 billion by 2013-14, but also making India an important engineering export nation by 2020. The fund will help the SMEs in achieving the desired target.”

In spite of massive growth in the last few decades, the Indian engineering sector suffers from severe technological obsolescence and lack of economies of scale. High-value-added products contributed less than 10 per cent of total engineering exports in 2008-09. The need is to step this up to 20-25 per cent in the near future.

The main objective of the TUFS would be to provide the necessary policy wherewithal for modernisation of the engineering sector.

Technology upgradation would mean a significant step-up from the current technology level to a substantially higher one involving improved productivity, improvement in the quality of products and/or improved work environment.

It would also include installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery. Further, units that need to introduce facilities for in-house testing and quality control would qualify for assistance, as this is a case of technology upgradation.

The scheme will be available for sourcing of capital goods, machinery and equipment, clean technologies and tooling for production of value-added goods.

EEPC sought a corpus fund of Rs 500 crore for the scheme to boost R&D in the Indian engineering sector. The fund can be created through the public-private partnership (PPP) model, where the engineering industry may be asked to contribute 49 per cent while the government chips in with 51 per cent.

EEPC has also stressed the need for creation of a skill development fund for the engineering industry on the lines of the textile industry policy, to encourage capital equipment purchases on easy finance; a level playing field with respect to financing; a national raw materials policy; and a change in bank lending policies to treat VAT and excise duty receivables by exporters as the primary security for export credit.

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Copper exporters for removal of value norms

VADODARA: Copper exporters in the country have teamed up against the existing value-addition norm and have sought a change in the exim policy.

The industry imports raw copper and exports finished products. As per the norm fixed by the ministry of commerce, unless the exporters achieve 15% value addition, they cannot import material of the same value for their exports. Simply put, exporters cannot import goods worth more than Rs 85 if their exports are worth Rs 100. But, if there is value addition in the finished products, they can import raw material up to Rs 100, a value equal to their exports.

Faced with rising prices of raw copper in the international market, exporters are finding it tough to meet 15% value-addition norm. Dealing in copper winding wires, enamelled wires, busbar wires and other products, they say they are unable to achieve value addition and are hence unable to import in the desired quantities. Subsequently, there is a loss of big chunk of revenues. Earlier on August 27, 2009, the government had issued notification to encourage value addition in manufactured exports and had stipulated a minimum 15% value addition on imported inputs under advance authorisation scheme.

The players say that 98% of the final product is copper. For such high percentage, value addition is difficult to incorporate. Now the Winding Wires Manufacturers’ Association of India (WWMA) has made a representation before the ministry of commerce and DGFT, asking the agency to restore the old norm that existed in the exim policy 2004-09.

WWMA chairman Shreegopal Kabra told “India exports around 3 lakh tonne of copper (which includes raw copper). This could be worth over $210 million. The rise in prices of copper in both the domestic and international arena has led to a disruption in the businesses of WWMA members. In December 2008, the average London Metal Exchange copper rate was $3,072 and it has been continuously rising thereafter. It crossed $6,982 in December 2009, which is nothing less than a 120% rise in the prices of raw material.”

“When the prices were around $3,072, exporters could make a value addition of 24% between December 2008 and January 2009 in enamelled copper winding wires. But now with the prices at $7,500, only 10% of value addition is feasible,” said Mr Kabra, adding that exporters are losing around $60-80 a tonne as they have to purchase the raw material from local sources by paying a hefty duty.

The Federation of Association of Small Industries of India (FASII) president and owner of Vidya Wires S S Rathi said, “It is high time that government supports the exporters as its takes years to develop the export market. Unfavourable policy change will take a heavy toll on the strenuous efforts put by one and all including government agencies to develop this market.”

Mr Kabra feels, “Copper wire sector must be given relaxation in line with that given to the gems and jewellery sector.” Among the 27 organised winding wire producers, Birla Copper and Sterlite Industries are the biggest exporters from India. The size of the domestic virgin copper market could be around 7 lakh tonne, of which 3 lakh tonne is being exported, Mr Kabra added.

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Markets cheer hike in iron ore export duty

Mumbai: Shares of six steel product makers rose on the Bombay Stock Exchange on Tuesday after the government increased export duty on iron ore lumps to 10% from the earlier 5% and imposed a 5% export tax on iron ore fines.

Shares of Ispat Industries closed 7.75% above the previous close (Thursday last week, since the markets remained closed on Friday, December 25, and Monday), JSL Ltd was up 4.78 %, Bhushan Steel 1.77 %, Tata Steel 1.02%, SAIL 0.46 %, and JSW Steel 0.08 %.

The government’s move is being seen as a small victory for domestic steel makers who were expecting a rise in iron ore prices. India is the world’s biggest producer of iron-ore and is also one of the biggest exporters of the ore, especially to China.

According to JP Morgan, Asia Pacific equity research report, “Indian iron ore export prices are more a function of China’s demand supply dynamics than India's cost structure and hence, the ability of Indian iron ore exporters being able to pass on the export tax should be a function of China's demand.” “The export taxes could modestly lower costs for the DRI-steel producers. However the March quarter tends to be the strongest quarter demand-wise for the long steel producers,” the report added.

Of the country's total iron-ore output which is estimated at over 200 million tonne, India exports around 95-100 million tonne per year, mainly in the form of fines and lumps. Nearly 80% of India's iron ore exports go to China and the balance to South Korea and Japan.

As per the latest data for the current financial year, Indian iron ore exports for the 7-month period (April to October 2009) increased by 21% in volume terms year-on-year to 53 million tonne, mainly on account of China.

Steel players have already started hiking steel prices, considering a rise in raw material prices of iron ore and coking coal. Tata Steel and state run Steel Authority of India Ltd have already hiked the long product prices by Rs 1,500 to Rs 2,000 per tonne. Others, including Ispat industries, JSW Steel, Essar Steel and Bhushan Steel are considering a price hike from January. The raw material negotiations will start in January next year and the new contract price of iron ore is expected to be about 10-25% higher than the last year.

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Govt defers decision on safeguard duty on steel items

New Delhi, May 11; In what appears to be a victory for users, the Government has deferred a decision on a proposal to impose provisional safeguard duty on hot rolled coils/sheets/strips. It said the matter needs to be examined further after taking views of the consuming industry.

“We felt that not enough homework had been done and there is a need to consult both the domestic industry and other interested parties concerned. We have asked the Directorate General on Safeguards (DGS) to consult the domestic user industry and come back to the board after 60 days (with recommendations),” Mr G.K. Pillai, Commerce Secretary, told reporters after a meeting of the Standing Board on Safeguards. Mr Pillai heads the board.

The Steel Secretary, Mr P.K. Rastogi, said there was no urgency to consider the safeguard duty. The interim proposals of the DGS were found to be “insufficient”, he noted.

Asked if there could be any injury to the local industry in view of non-imposition of the safeguard duty, Mr Pillai said, “From the evidence we do not see any threat to the industry”. He also highlighted that steel users had brought to the Government’s notice that they had appealed to steelmakers to further reduce steel prices, matching import prices.

“We were expecting a decision. Imports were being allowed at very low prices. The advantage of whatever demand was generated from stimulus package was going to Ukraine and Chinese companies,” a spokesman for Ispat Industries said.

The Director-General (Safeguards) had in April 2009 recommended a provisional safeguard duty of 25 per cent on imports of hot rolled coils/sheets/strips up to the cost, insurance and freight (CIF) value of $600 a tonne, considered a reasonable benchmark.

In India, there are currently five producers who have the capacity to produce hot rolled coils/sheets/strips — Ispat Industries, Essar Steel, JSW Steels, Steel Authority of India and Tata Steel. The petition seeking safeguard duty was filed by Ispat Industries and Essar Steel. JSW Steel and Steel Authority of India had supported the petition.

In its preliminary finding, the Director General (Safeguards) had concluded there has been significant increase in imports at low prices. Also, the volume of imports surged in view of steeply falling import prices.

This has impacted the domestic industry prices, which fell from Rs 40,000 a tonne in April-September 2008 to Rs 26,296 in February 2009, and consequently led to a decrease in profits. In fact, the domestic industry suffered significant financial losses and negative return on capital employed, the DGS had concluded.

From the range of 1,000-8,000 tonnes a month, the volume of lower priced imports had suddenly surged to as high as 97,000 tonnes and 1,30,000 tonnes in January and February 2009 respectively, according to preliminary findings. The domestic industry had argued that in February 2009 itself, about 1 lakh tonnes landed at Mumbai port at an average price of $450 a tonne. The import prices started declining from above $1,000 a tonne in August 2008 and have continued to fall even now.

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EEPC India urges supportive measures to engineering industry

Mumbai (PTI): EEPC India, the apex body of engineering exporters from India, has urged the government to provide supportive measures for Micro, Small and Medium Enterprises (MSMEs) sector, a top industry official said here.

"In the present uncertain market scenario, engineering exporters require support measures, specially the MSME state in order to survive in these hostile times," EEPC India Chairman Aman Chadha said on the occasion of EEPC India's Western region Award Presentation Function for 2006-07 here.

He elaborated that the hostility in the global trading environment is now affecting engineering sector too which is now facing considerable demand problem in global markets and are under acute distress.

Mr. Chadha noted that certain segments of Indian engineering industry such as nand tools, bicycle and parts, castings, auto components, and similar other low value added engineering units are in no way different from the textile and leather sector, in terms of their shrinkage in demand leading to loss of output and employment.

However, the government has consciously refrained from supporting the engineering sector as there is a belief that engineering exports will pull through, Mr. Chadha said.

Mr. Chadha said that demand for engineering products has decreased drastically, thus considerably affecting Indian engineering exporting community. The extension of Focus Market Scheme will help exporters in maintaining their traditional markets to some extent, he noted.

With the $10.6 billion engineering exports, the western region of the country had a share of almost 40 per cent of India's total engineering exports of $26.49 billion in the fiscal 2007.

Its a matter of joy that this share has gone up to 41 per cent in FY'08 with exports of $13.6 billion in FY'08 out of total engineering exports of $33.15 billion in the year.

Mr. Chadha also pointed out that circumstances in 2006-07 were more conducive for exports. The exchange rate was far more benign than in the year FY'08 and in early part of FY'09. Further, the raw material prices and freight rates were less volatile as compared to subsequent fiscal years.

Thus, the remarkable growth in engineering exports witnessed during the fiscal year FY'07 is an indicator that an "enabling environment" can do immense good to boost the export capabilities especially of those belonging to micro, small and medium scale sector.

On the occasion, 85 companies from the region were awarded for their excellent export performance.

The list included some of the leading names like Bharat Forge, Uttam Galva, KEC International, Bajaj Auto, Hilton Metal Forging, Jyoti Steel Industries, Aeroflex Industries and Finolex Cables.

On the occasion, Governor of Maharashtra S C Jamir highlighted the efforts made by the government to simplify the process of exports and improve the infrastructure for the same purpose.

He hoped and expressed confidence that "we will soon tide over the present crisis." He also requested the industry captains to continue to play their national role of creating employment in the country by enhancing productivity and efficiency and venturing out to new markets.

In his welcome speech, Nayan Shah, Regional Chairman, EEPC INDIA (Western Region) highlighted the key role played by EEPC India in promoting export and the cause of the exporting community by hosting overseas exhibitions, fielding trade delegations and organising buyer seller meets.

He said that world-wide recession and decrease in demand has badly affected Indian exporting community. Shah noted that Governments stimulus package is taking time to impact the economy and more such packages are required on consistent basis. The Council has also urged the Government for granting of Focus Market Scheme benefit to EU and North America, which so far attracted 40 per cent of India's engineering exports but are facing severe crisis at present.

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FICCI seeks separate export promotion council for auto sector

NEW DELHI: Industry lobby Federation of Indian Chambers of Commerce and Industry (FICCI) Monday urged the government to set up a separate export promotion council (EPC) for India's automotive industry to help it achieve higher share in the global market.

"A separate EPC with the primary objective of helping the Indian auto sector to achieve 5 percent share in global trade in the next 10 years needs to be created," the chamber said in a statement.

According to UN estimates, India currently accounts for about 0.5 percent of the gross annual auto exports, marginally up from 0.2 percent in 2000.

Among developing countries, India stands sixth in the global auto exports, trailing behind China, Mexico, Brazil, Turkey and Thailand.

China is leading the market among developing countries with 4.4 percent share.

India has recently undertaken mass export activities with South Korean carmaker Hyundai's Indian operations leading the bunch as the biggest exporter.

"Indian automotive industry needs to diversify its destinations of exports for which this council would be instrumental. Currently, India does not export significant amount of automotive items to some of the major importing countries like Australia, Canada, Russia and Saudi Arabia," it added.

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Engineering goods exporters eye ASEAN market KOLKATA: On the heels of an economic crisis getting intensified in the US and Europe, Indian engineering

KOLKATA: On the heels of an economic crisis getting intensified in the US and Europe, Indian engineering goods exporters are looking towards the A sean for driving up exports from the country.

The exporters' body is especially counting on the potential of expanding trade with the region since it accounts for nearly 30% of India's engineering goods exports.

Countries like Malaysia, Indonesia and Singapore in particular hold immense potential. Currently, the ASEAN trade bloc is the third-largest market in Indian engineering goods, behind the US and Europe.

Engineering goods exporters are more upbeat about growth prospects in the ASEAN after holding the India Engineering Export Exhibition (Indee) recently in the Malaysian capital, Kuala Lumpur.

At Indee, which was organised by EEPC India, in collaboration with the federal government of Malaysia and leading chambers, Indian compnies received export orders worth nearly $ 0.20 million and trade enquiries worth $5 million.

In course of buyers and sellers meets at Indee, two Malaysian companies evinced interest in entering into joint ventures with Indian companies for manufacturing mechanical seals and solar panels.

EEPC India chairman Rakesh Shah said with talks going on between the countries for signing the Comprehensive Economic Cooperation Agreement (CECA), Kuala Lumpur has been chosen the first venue for export promotion among the ASEAN countries.

Besides the prposed CECA, trade between India and Malaysia is expected to get a boost in the wake of India signing a free trade agreement with the ASEAN trade bloc. Bilateral trade between India and Malaysia has grown 41% to $4.14 billion during January-June 2008.

Exports of Indian engineering goods to Malaysia increased 106% to $747 million in 2007-08 while India's imports from that country increased 52% to $569 million during the year. EEPC expects a 100% jump in Indo-Malaysian bilateral trade in engineering goods in the current year.

"As per feedback from 54 out of 169 Indian engineering companies which participated in the Indee, 590 new contracts were generated during the exhibition," said Mr Shah.

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Duty-free export of steel items may get govt nod

NEW DELHI: The government plans to allow duty-free exports of steel products that are manufactured using imported inputs. The finance ministry has finalised a new scheme for the steel sector under which the export duty on value-added steel products would be withdrawn to the extent of imported raw material used in it.

The benefit would be applicable only for companies using advance licensing scheme (ALS) to avail duty-free imports of capital goods and other inputs. “The new scheme has been finalised by the department of revenue on the advise of the Committee of Secretaries (CoS) reviewing prices of essential commodities. The CoS would now examine the scheme at its next meeting before operationalising it,” an official source said.

The department of revenue has finalised the scheme only for flat steel products (hot and cold-rolled coils) and has suggested that it be operationalised when duty is re-imposed on flat steel products. Sources, however, said that the government may take a larger view of the entire issue and implement the scheme even for steel products that currently attract export duty. Earlier, the steel ministry also suggested exemption for all steel exports that used imported inputs.

While the government withdrew 5-15% export duty on flat steel products and galvanised steel, it has maintained 15% duty on long steel products (used in housing and construction activities), pig iron, sponge iron and semis like blooms, billets, plates and bars. Export duty is levied on these products even if uses imported inputs under the ALS scheme.
Under the new scheme, duty exemption would be extended only after the steel exporter/manufacturer gives an undertaking that the goods to be exported has been manufactured only from material imported under the ALS scheme. The ALS facilitates duty free imports of inputs and capital foods on a specified export obligation.

Companies would also have to maintain separate account for receipt and issue or utilisation of raw material for manufacture of steel products meant for exports. The commerce ministry would prescribe conditions that would have to be adhered for getting the duty exemption.

The changes are expected to improve domestic availability of steel products and reduce pressure on prices that has remained firm so far. Rising price of inputs like iron ore and coking coal is further putting pressure on steel companies to revise prices.

It is expected that domestic availability of various steel products could be improved by over 2.5 million tonnes if exports are undertaken only using imported material.

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Govt mulling export ban on flat steel products, iron ore

New Delhi, July 17 (PTI) Steel industry could be in for another shock with the government now considering banning exports of flat steel products with a view to check rising inflation.

"If the prices of flat steel products are not being kept in check, either the export duty could be increased or a ban on exports could be considered to increase domestic availability," Committee of Secretaries (CoS) observed in its last meeting.

It also noted that the government may consider increasing export duty on long steel products and subsequently explore the possibility of banning iron ore exports to increase domestic availability.

Steel prices have since January this year shot up by around 50 per cent, adding to the double-digit inflation, which is hovering at a 13-year high of just below 12 per cent.

Government had on June 13 exempted flat rolled products of iron and steel, including galvanised products, pipes and tubes that attracted export duty ranging from 5 to 15 per cent ad-valorem, from the purview of the export duty.

The rate of export duty on long products such as bars and rods, angles, shapes, sections and wires was also increased from 10 to 15 per cent and a 15 per cent ad-valorem duty was imposed on iron ore.

The CoS decided that the Ministry of Steel in consultation with Department of Revenue would soon consider suitable measures for increasing the domestic availability of steel and moderating its prices.

The ministry would also consider proposals for implementation in early August when the three-month self- moratorium imposed by major steel producers to hold their priceline expires.

The ministry would quickly undertake an analysis on the options available for moderating the prices of iron ore and submit it for consideration of the company of secretaries during the next meeting, they added. -------PTI

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Kolkata, April 11 Describing the recent Service Tax Refund Notification on Foreign Commission Agents (FCAs) issued by the Finance Ministry as “bureaucratese at its worst”, Mr Rakesh Shah, Chairman of Engineering Export Promotion Council (EEPC), said here that it goes not only against the RBI guidelines but also against the Department’s own notification issued in 2002.

Talking to Business Line, Mr Shah said the April 1, 2008 Notification has allowed refund on the service tax paid to foreign commission agents to the extent of only 2 per cent of the f.o.b. value of exports, “when the RBI guidelines allow FCAs to be paid up to 12.5 per cent of f.o.b. value of exports”.

He said the Department of Revenue by its own circular issued in 2002 had clarified that for those exporters availing of export benefits, the foreign agency commission would be 12.5 per cent.

He said it was surprising that the April 1, 2008 Notification has set a limit of only 2 per cent of f.o.b. value of exports for foreign commission agent’s payment to be refundable.

“The 2 per cent f.o.b. limit is hardly acceptable in these times and will not in any way benefit exporters.”

Pointing out that the principal notification with regard to the 16 services that come under the purview of service tax refund was issued on October 6, 2007, Mr Shah observed that this notification had a further restrictive provision which states that the refund claim has to be filed on a quarterly basis, within 60 days from the end of the relevant quarter during which the said goods have been exported.

He said most exporters pay commission to their respective foreign agents only after realisation of export proceeds. The period allowed for export proceeds realisation by RBI is 180 days for exporters and 360 days for status holders. According to him, if exporters have to claim service tax refund within a period of 90 days as ordained by the October 7, 2007 Notification, it would further add to the fund squeeze that small and medium exporters were now facing, confronted by the rupee appreciation and sharp increase in raw material prices.

Mr Shah said he has already represented the above anomalies to the Finance Minister and Commerce Minister, requesting that the service tax refund limit on foreign commission agents be increased to 12.5 per cent of f.o.b. value from the allowed 2 per cent.

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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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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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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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Global automakers jostle for place in India's hot auto market

FRANKFURT, Germany: Global automakers on the hunt for new and lucrative markets are jostling for a place in India, where the car market is growing at an average of 20 percent a year, outpacing even China.

Getting a foothold in the giant country and economic powerhouse can be a tricky affair — the key to success lies in keeping the price ticket low, squeezing margins. Still, that is not deterring automakers like Renault, Hyundai and others from trying.

"Not being in India would be a huge strategic mistake," Nissan Motor Co. Executive Vice President Carlos Tavares told The Associated Press on the sidelines of the Frankfurt auto show. "It's an investment for the future."

Indian car sales totaled 1.1 million in the year ended in March, with compact hatchbacks accounting for nearly three-quarters of that. Though that number pales in comparison to China, the market is growing much faster.

India's demanding, frugal consumers want inexpensive and fuel-efficient cars, durable enough to withstand potholed roads and roomy enough to fit a family of five or six. Plus, of course, an arctic-level air conditioner.

Nissan has lagged behind its Japanese rivals in tapping opportunities in India, both as a market and as a manufacturing base.

Leading Japanese automakers, including Toyota Motor Corp., Honda Motor Co. and Suzuki Motor Corp., have significantly expanded their operations in India in recent years.

Nissan made its first move to enter India this year, signing up for a passenger car venture with its partner, Renault SA of France and Indian automaker Mahindra & Mahindra Ltd.

The three are building a large plant near the southern Indian city of Chennai, which Nissan would use to manufacture and export compact cars to Europe.

Renault CEO Carlos Ghosn said Tuesday that construction at the plant isn't likely to start before 2008, with production expected to begin in 2010.

Spurred by Tata's ambitions for a super-cheap car, Nissan and Renault also are exploring the viability of a sub-US$3,000 (€2,175) vehicle.

Renault is talking with Indian automaker Bajaj Auto Ltd. about a possible alliance to manufacture such ultra-cheap cars. Bajaj Auto, based in the western Indian city of Pune, is one of India's leading manufacturers of motorcycles and motorized rickshaws, but has no experience making cars.

Given import taxes that exceed 100 percent, carmakers looking to break into the Indian market need to think about producing locally.

India has a competitive advantage over China, as the Indian government allows carmakers to establish 100 percent owned local subsidiaries, an option chosen by companies like General Motors Corp., Hyundai Motor Co. and Ford Motor Co. In China, local partners are mandatory.

South Korea's Hyundai developed the Santro for the Indian market, designing extra head room for turbaned passengers and paying more attention to the back seat, where the owners of Indian cars often sit, Hyundai spokesman Thomas Rauh told The Associated Press,

Hyundai's Indian unit has shifted its entire production of the Santro, known outside India as the Atos Prime, to the southern Indian town of Sriperumbudur, just outside the port of Chennai.

A third of the cars produced at this plant are exported to 68 countries, from neighboring Sri Lanka to faraway Mexico. By October, Hyundai will complete a second factory nearby, doubling annual production to 600,000 cars — most of them compact hatchbacks that sell for about US$7,000 (€5,080).

Rauh said car makers once questioned whether Indians were interested in making quality cars, long considered a luxury in this once-socialist style economy. Now, Hyundai is focusing on making cars for affluent Indians and for export, leaving others to fight for the lower end of the market.

"It's a dogfight down there," he said. "It would not help us to go downmarket."

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