The Association of Indian Forging Industry is very disappointed with the imposition of 5% import duty on iron and steel products as the move will further fuel inflation.
Mr. Vidyashankar Krishnan president of AIFI said that “The move will keep steel prices at high levels, leading to higher inflation and be a big blow for steel user industry.”
AIFI said that “On the one hand the Finance Minister is calling for price cuts from the industry to stoke up demand and on the other creating tariff barriers which would lead to increase in prices of steel, that contributes upto one third of the inflation - say about 300 basis points. This is not just sending confusing signals but is also adding to the general negative sentiment. The Government’s altering the levy structure to suit the steel industry, is a move that is missing out on about 300 to 500 basis points of deflation potential so critical to infuse funds and liquidity into the financial system.”
AIFI added that “Conversely, if steel prices are allowed to seek real levels, not only would the inflationary trend be halted, but even reversed. In fact it would contribute to a slight deflation, even negating other factors contributing to inflation. The impact on prices of goods, commodities and services for the common man would come down. This would provide greater leeway to the finance ministry and RBI in resorting to pump priming which is very essential to lift out an economy in the throes of recession.”
It added that “It is surprising that the steel lobby that had cited market forces earlier till September 2008 for getting their increases through has turned around and is now against the very same market principles that they were quoting. Perhaps, they want to continue to cash in by re-structuring markets to their convenience by asking for even higher import duty on steel.”
Hence, for the above reasons, AIFI reiterates the call to the Government of India and all policy makers to allow steel prices to reduce to international levels or even lower so that Indian auto component manufacturers can regain export competitiveness and survive. Thereby the Indian economy would bounce back on the back of export lead growth.
AIFI established in 1965, is the spokesman of the Indian Forging Industry. As per estimates the industry provides direct employment to about 200,000 people, contributing directly to the livelihood of more than three quarter of a million people. The total capacity at present is estimated to be about 1.5 million tonnes per annum. The total estimated production of forgings for the year 2006-07 was 983,000 metric tonnes. It is expected to cross the 1 million tonne mark for the year 2007-08 The industry’s exports recorded a growth of almost 23% in 2006-07 and is expected to reach US$430 million during 2007-08.
Source : Steelguru.com