MIP on steel: engineering exporters seek ‘compensatory mechanism’

The EEPC has sought a “compensatory mechanism” to make up for the increased raw material cost which the distressed exporters will bear The Dollar Business Bureau

Engineering sector which accounts for almost a quarter of India’s total merchandise exports is expected to see a sharp decline due to falling demand and prices of commodities in the global market.

Expressing concern over the government’s decision to impose minimum import price (MIP) on steel products, engineering export promotion body EEPC India has said the move will trigger up to 10% hike in raw material for engineering goods manufacturers and thereby reduce their global competiveness. “The introduction of the minimum import price on steel products will raise the cost of raw materials for engineering products by about 6-10% depending upon the nature of product. This will have a serious debilitating impact on engineering exports which have already declined by a huge 15% in the first nine months of the current fiscal,” said T S Bhasin, Chairman of EEPC India. With an aim to protect domestic steel manufacturers who had been complaining against cheap imports, the government, last week, announced the imposition of MIP of up to $752 on 173 steel products. Engineering sector which accounts for almost a quarter of India’s total merchandise exports is expected to see a sharp decline due to falling demand and prices of commodities in the global market. The EEPC has sought from the government a “compensatory mechanism” to make up for the increased raw material cost which the distressed exporters, mostly in the SME segments will bear after the imposition of MIP. “Segments like auto and auto parts, industrial and electrical machinery, products of MSME sector, which in any case have low margins and are facing cut-throat competition will face sudden escalation in raw material price, giving a further jolt to the exporters,” the industry body said in a statement. It said that the move will have an inflationary impact on the entire manufacturing sector as all import invoices will be at MIP now. “A new international price reimbursement scheme (IPRS) should be immediately introduced,” Bhasin said. The EEPC also asked the government to remove the safeguard duties on the imports of steel products. “The advance authorisation route is not used by the MSME sector and has many limitations. Hence unless a price reimbursement mechanism is worked out for engineering exporters, there will be no revival of exports in the next six months,” the EEPC chief said. As per the notification issued by the Directorate General of Foreign Trade (DGFT), the MIP will be implemented for six months. However, the inbound shipments carried under the advance authorisation scheme and consignments of high-grade pipes meant for pipeline transportation systems in the oil and gas industry will be exempted from MIP.

February 08, 2015 | 01:40pm IST.

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MIP on steel: engineering exporters seek ‘compensatory mechanism’

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