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Mr. Ravi Sehgal is the 24th Chairman of EEPC India

The Board of Trade (BOT), an august body on Trade Policy chaired by the Union Commerce, Industry and Civil Aviation Minister, Mr Suresh Prabhu, was held on 15 February 2019. This gave me a unique opportunity, on behalf of EEPC India and the fraternity of engineering exporters, to provide an in-depth analysis of the current trend in engineering exports and the major issues facing the future growth of such exports from the country.

The BOT was held in the backdrop of a concerted effort by our steel majors to seek the imposition of Minimum Import Price (MIP) on steel products. The Ministry of Steel had also formed a Committee to advise them on this issue. At the BOT meeting I reasoned that since our domestic steel prices were on average 20 percent higher than international prices in most categories of steel – ingots , billets, HRC, wire rods, among others – and there already exist various measures imposed to prevent dumping into the country, it will be counterproductive to further ring fence the steel sector through a WTO incompatible measure such as the MIP. It has been our firm belief that we must protect our domestic industry against import surges and dumping through WTO compatible trade remedial measures but we should not create a situation where a few players can indulge in rent seeking activities. The good news is that our efforts seems to have paid off and recent reports indicate that the possibility of MIP being imposed has receded, more so as domestic steel prices have further moved northwards and so have the global prices.

I also raised a few other issues that need to be attended to by the governmental machinery as a whole. This relates to looking at redressing the remaining past GST refund situation; clearing the various proposals in time so the we could plan our activities without delay; problem of finance for the MSME sector; and the need for technology upgradation; among others. This edition of the magazine carries the representation that we shared with the BOT members for further action.

Engineering exports, in recent months, have been faltering. Just to give an idea, engineering exports in Q1 2018-19 grew by 15.92 percent over Q1 2017-18; Q2 2018-19 grew by 7.65 percent over Q2 2017-18; and Q3 2018-19 grew by -4.58 percent over Q3 2017-18. While the reason for the fall in Q3 has a base effect component, major anomalies have crept in the engineering sector that has precipitated the fall and will continue to do in Q4 2018-19 and in subsequent months, unless remedial measures are taken. Three key factors that have led to decline in engineering exports in Q3 2018-19 are: the slowdown in India’s Steel exports as domestic price realisation is far better than external prices; fall in Copper and products exports due to the fall in production majorly attributable to the permanent shutdown of the 400 KT Tuticorin smelter of Sterlite, which accounted for 40 percent of the country’s copper smelting capacity; and the fall in Zinc exports. There has been a drop in the Zinc mined by Hindustan Zinc Ltd for the first six months by 13 percent from 386,000 MT in first half of 2017-18 to 334,000 MT in the first half of current fiscal.

Despite these headwinds, I do believe that we will surpass last year’s $76 billion exports figure in our sector and be in the vicinity of $80 billion in the current fiscal, which will be the highest ever engineering exports figure recorded in the post-independence era.

The world focus in this issue is Germany, the mecca of global engineering and exhibitions. EEPC India will be participating, once again, in Hannover Fair in the first week of April 2019, which will herald our first global exhibition in the new fiscal year , and follow it up with participation in bauma 2019, the world's leading fair on construction machinery, in Munich, Germany.

This apart, the IESS VIII is scheduled to be held over 14-16 March 2018 at the Chennai Trade Centre, Chennai, where Malaysia is the Partner country and I look forward to meeting our constituents, readers and well-wishers there.

 

 

 

This meeting delivered some results and the RBI caution listing date was postponed to 31 March 2019; the ‘pre-import’ condition was dropped vide DGFT Notification No.53 dated 10 January 2019 and efforts are now being made to educate the exporters with respect to using the UCO Bank mode for exports to Iran. I hope to continue this dialogue further during my meetings in the month of February 2019 when, among others, the Board of Trade Meeting is also scheduled.

 

As I write, the Interim Budget 2019-20 has been presented by the Union Finance Minister, MrPiyush Goyal. The fiscal deficit is expected to be around 3.4 percent of the GDP while the first step towards a Universal Basic Income (UBI) Scheme for smaller farmers has been initiated. Similarly, income tax exemption has been provided for incomes up to Rs5 lakh per annum. I understand that all the tax-related proposals are likely to be ratified when a full budget is presented by the newly-elected government in July 2019.

 

There is no doubt now that the pace of engineering exports growth has slowed down considerably and the third quarter has shown negative growth. While detailed analysis of the trend is provided in the following pages, three critical segments have held back the potential that is there: primary iron and steel exports; copper and copper products exports; and zinc and zinc products exports. Of the three, the first two are the result of market imperfections and an exogenous factor respectively. EEPC India has been continuously hammering the point that while most segments of engineering face the vagaries of the market, domestic steel prices are not ‘market determined,’ resulting in higher prices making downstream value added uncompetitive in global markets. The other impact, now that the international steel prices have fallen, is that the Indian steel majors are catering only to the domestic sector, cutting back on their exports.

 

With respect to copper products exports, the closure of the Tuticorin plant has led to 40 percent drop in production of copper products while imports of refined products have increased. From a net exporter of refined copper, we have now become a net importer. With respect to zinc, there was a fall in domestic production, which hopefully is a short-term phenomenon. Clearly, we need to work out alternatives and some of the suggestions that we have been making to the government, if implemented, can help to some extent in the promotion of the rest of the engineering products. These are products where domestic production and external conditions do not face such negative externalities.

 

On our part, we will continue to promote engineering goods and the eighth edition of the International Engineering Sourcing Show, IESS VIII, scheduled over 14-16 March 2019, will be one such effort to give a major thrust to the promotion of sourcing of engineering products from India, showcasing technological advancement and future technologies, especially for our MSME units.

 

Malaysia is the Partner Country in IESS VIII being held in Chennai. Malaysia, with Asia’s eighth best and the world’s 25th best overall infrastructure, Southeast Asia’s fourth-largest and world’s 38th-largest economy, has one of the best economic records in Asia since its independence with its GDP growing at an average of 6.5 percent per annum for almost 50 years.

 

As both Malaysia and India are moving towards a technology-driven automotive industry equipped with shared mobility, connectivity, electrification, and autonomous driving, this is the most appropriate time for Malaysia Automotive, Robotics and IoT Institute (MARii) to play a lead role to participate in a global forum like IESS.

 

Malaysia’s participation is expected to be a major game changer at IESS 2019, anticipating greater collaborations between MARii and Indian companies and the creation of a technology ecosystem between the two countries.

 

I urge our readers to join us in IESS VIII and benefit from the bouquet of the programmes we are going to present at this mega show.
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