|
The Centre is reportedly mulling elaborate restrictions on the export of flat steel products. The move makes no sense; it is more likely to backfire and discourage capacity addition. The idea of effectively banning exports of valueadded steel products is apparently to try and boost domestic supplies, and so tame runaway price inflation. Yet exports represent only a small fraction of total steel output. Also, exports of upmarket, flat steel products is a rather recent phenomenon. The policy framework surely ought to encourage such exports and value addition. In the process, we would boost domestic production capacity, rev up supply and so ease prices. But the stress seems very much on administrative fiat. Exports, reportedly, would be allowed only if imported raw materials are used. Such intentions of autarky, in a supposedly liberalising economy, would be fundamentally flawed. They need to be nipped in the bud.
The fact remains that there has been untoward recourse to policy intervention in steel, in recent months. Export tariffs have been clamped both on flat and long products. Thankfully, export duties on flats — including hot-rolled and cold-rolled coils — have since been removed. But those on long products remain very much in place, with up to 20% duty slapped. The step now being considered is to bring back export controls on flats. The finance ministry is reportedly examining the plan, which has already been okayed by a committee of secretaries. Such frequent changes in the tariff regime would send entirely wrong policy signals, dampen investor sentiment, and perhaps even put expansion projects on the backburner. The point is that we have a clear-cut competitive advantage in steel. Hence the need for vision and proactive policy to boost output and value addition. The world’s biggest steel producers do want to make India their production and export hub. Fortuitously, the investments long in the pipeline, be it of Tata Steel, Posco or Arcelor Mittal, are in states with high poverty ratios: Orissa, Jharkhand and Chhattisgarh. The policy regime ought to enable the coagulation of investments, rather than taking to task export orientation. This is no way to be globally competitive.
|
