Promit Mukherjee

Mumbai: Manufacturers of value-added steel products such as pipes and tubes, among others, are a troubled lot.

On the one hand, an export duty of 5% to 10% implemented since May 10 has become a heavy burden, on the other, they are finding it hard to decipher finance ministry’s circular issued on that date as to which products fall under the purview of export duty. Besides this, there are also rumours that the ministry may roll back export duty on finished steel.

As a result, export-oriented finished steel goods worth Rs 500 crore is held up in the country, either at the ports or at the factories, thereby incurring loss in terms of value and also goodwill in the export market.

The government notification says 10% export duty is levied on “iron and steel pipes and tubes”.

“Our sense is that the cess is only on carbon steel products. But customs officials interpret it otherwise and are including stainless steel pipes and tubes in the same bracket,” N C Mathur, director (corporate affairs), Jindal Stainless, told NewsWire18.

Companies are frequenting the Engineering Export Promotion Council’s office in Mumbai to get a clear picture of the notification.

The office is flooded with representations from several companies in and around Mumbai asking the council to request the ministry on rollback of the duty.

“Goods worth Rs 500 crore are held up in several plants in different parts of the country and most of them have brought their containers back from the ports on account of the imposition of the duty from May 10,” said S K Saraf, chairman, western region, Federation of Indian Export Organisation.

Saraf is also the chairman of Technocraft Group, a company which is exports drum closures, steel tubes and scaffolding.

He said the Rs 500 crore figures is increasing by the day across the country as factories have not stopped production, but have held back their exports due to the export duty.

The pipe manufacturing industry is said to be worst hit by the export duty. K G Mantri, chief financial officer, Man Industries Ltd, said: “The export duty will eventually turn out to be a death knell for the industry as 70% of the total production of pipes in the country is exported.”

Analysts say there is a huge demand for Indian pipes in US and Middle East with about 70% of their order booked for exports.

“With the imposition of the duty, at least in the short term, all pipe manufacturing companies, except PSL Ltd, will definitely be impacted,” said Arvind Jain, investment officer, Banyan Tree Finance.

He said the current domestic capacity is between 4.5 million tonne per annum to 5 million tonne per annum.

With 65% to 70% of the product being exported, a duty will definitely eat into their margins and percentage contribution to the bottomline from the Indian facilities of these companies will be less.

However, Jain expressed hope that the pipe manufacturers will soon get a breather from the Ministry.

Mantri said in case the duty is not rolled back, manufacturers in the country face the fear of losing their competitive edge in the export market.

“We are in the league of top three countries looked as quality pipe manufacturing hubs. Moreover, we have price advantage too,” he said.

Rajat Srivastava, regional director,Engineering Export Promotion Council, said: “EEPC had sent a request to the finance ministry to impose duty on exports of raw materials such as pig iron, sponge iron and HR coils as domestic supply was being affected. But we never propagated a duty on export of finished steel products,” he said.

Since the investment is made in the industrially backward region of the state, it qualifies for the government’s mega project scheme.

“This is well above the mega project criteria which the government has benchmarked for backward and developing areas,” he said.

Source : DNA