Ban on steel exports to drag India in courts overseas

A blanket ban on export of steel items will have serious repercussions as the industry will not only lose international market and dent country’s credibility, but will attract huge litigations in courts overseas.

The ban, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM), Indian exporters on one hand would have to be spending huge amount of money to fight litigations, on the other massive stocks of inventories be piling up of materials already produced specifically for export purposes. Their will be no domestic market or consumption, says the industry body.

The Chamber President, Venugopal N. Dhoot said, its ironical that we continue to export freely the very important raw materials "iron ore" with a nominal export tax and the end-product `steel’ is being banned from export.

The Chamber said, the total percentage of exports of steel at the moment are not more than 6-8% of the total production. A significant part of the exports of steel consist of products which do not have a domestic market or are surplus to domestic requirement. A blanket ban on the export of steel items will put a strain on the existing manufacturers who have imported and established steel mills to convert raw steel into exportable product. With a blanket ban on exports, what happens to the material which necessarily has to be produced or to the equipment already established which will be rendered idle and in fructuous.

The Chamber Chief said the export markets are established with considerable efforts and long term investment. If exports are banned abruptly, international buyers would seek other markets and India would lose its export markets on a very long term basis. It will take years for India to regain export initiative once again.

The major steel manufacturers have already given an assurance to the Steel Ministry on 26th March 2007 that they will be voluntarily controlling exports and exercise self-restraint. Naturally, such self-restraint would not be at the cost of dishonouring existing long term export contracts or failing in their obligations under EPCG to the government and thereby committing an offence.

Government of India has already withdrawn the benefits/incentives given under sovereign assurances to the steel industry to encourage exports through the earlier national trade policies. The effects of these withdrawals are yet to be seen as they have happened only in the last week or so. The exporters have not been given reasonable time to adjust their exports to these withdrawals.

Urging the government to review the iron-ore exports policy, Mr. Dhoot said high and medium-grade iron ore reserves would not last more than 19 years, even if exports of these grades are frozen at the current level and if the targets set out in NSP 2005 are to be met. This necessitates computation of depletion premium for ion ore to carry out economic analysis. The depletion premium works out to US$10.18 for a steel producer located within the state. No such depletion premium has been applied for coking coal, as the prices did not exhibit any trend prior to the recent steep price hike.