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Engineering exports from India face the challenge of tackling global protectionist measures. Plunging copper and copper products exports following closure of Sterlite’s smelter plant in Tamil Nadu and high domestic steel prices are some other challenges.
Despite green shoots in West Asian nations, the ambiguity over withdrawal of Generalised System of Preferences (GSP) by the US and protectionist measures in Europe are a worry, said Ravi Sehgal, Chairman, Engineering Export Promotion Council (EEPC). “GSP withdrawal will obviously have an adverse impact on exports, say to the tune of 3-5 per cent. But that is not our major concern. We are worried about loss of buyer confidence and a possible higher duty in the long run. We fear that US companies may not enter into contracts with us because of the ambiguity that persists,” Sehgal told BusinessLine.
He said growth in exports of engineering products in FY19 remained flat at 8 per cent compared to that in FY18. This could indicate that there is a possible re-think by global buyers.
EEPC had expected engineering exports to be to the tune of $90 billion by the end of FY19, but scaled projection down in view of increased protectionist measures. Engineering exports from India stood at around $82 billion in FY19 against $76 billion in FY18.
On the backfoot
EEPC, the apex body of engineering exporters, is under the Union Ministry of Commerce, and has over 13,000 members, nearly 60 per cent of them are MSMEs. According to Sehgal, Sterlite’s closure could result in nearly $3 billion loss in export of copper and copper products. Exports of the metal and its products fell by 61 per cent to $127.43 million in March, 2019 compared to that in the same month last year. Cumulatively for FY19, exports dropped by 69.4 per cent to $1.06 billion. “The loss could be to the tune of $3 billion this fiscal. And there is also a fear of rising imports of inferior or hazardous quality of copper scrap,” he said.
Sterlite alone accounts for 40 per cent of the country’s copper smelting capacity.
The other concern is high steel prices. According to Sehgal, EEPC India has pointed out to the Ministry how high steel price is making the country’s engineering exports uncompetitive in the international market.
“India makes around 106 million tonnes of steel and the number is expected to go up. We are saying that there be just one per cent allocation of it be channelised for engineering exports at a government determined international price,” the EEPC Chairman said.
EEPC had begun discussions in this regard with some of the domestic steel-makers around two years ago. But things are yet to fructify.
Sehgal is pinning his hopes on the new government. There is also an apprehension that a hung House, and a government with multiple coalition partners, can lead to policy paralysis or delays.
Over the last three-to-four years, there’s a mindset change in the bureaucracy. It is on its toes and is easily available to resolve issue of exporters. This wasn’t the case earlier.
“A single party majority or soft majority by a party with some coalition partners is always good. Multi-party government where none have the numbers is always bad for policy-making. We don’t want delayed policy-making,” he said .
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