Financial Daily from THE HINDU group of publications
Saturday, Mar 23, 2002
Financial Daily from THE HINDU group of publications Saturday, Mar 23, 2002 |
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Industry & Economy
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Steel Changes likely in advance licence for seconds steel Ambarish Mukherjee
NEW DELHI, Match 22 THE Government plans modifications in the advance licence scheme for exporters following the hike in import duty on seconds and defective steel products to the WTO-bound rate of 40 per cent and that on ship breaking scrap to 15 per cent. Highly-placed Government sources told Business Line that work was on to restructure the existing scheme in such a manner that ruled out the possibilities of any misuse. The existing penalty rate would be raised so that it really acted as a deterrent for any violation of the commitment that an exporter had to give before he was permitted to import seconds and defective steel under the scheme, the sources said. According to industry sources, the rates are likely to go up to more than three times the current penalty rates. Under the advance licence scheme, exporters import seconds and defective steel items at very cheap international prices for use exclusively in manufacturing items for export only. They get a period of 18 months from the date of import for executing the export. If the exporter fails to export within the specified time limit, he is liable to pay a penalty of 24 per cent of the C&F value of the import. Since this steel is imported at around one-fifth of the price of prime quality steel and sometimes at even lesser prices, the importer concerned makes a killing in the domestic market after cutting it into smaller sizes and selling it as prime- grade steel. This makes misuse of the advance licence scheme quite a profitable proposition even after paying the 24 per cent penalty. While domestic steel manufacturers had been clamouring for complete abolition of the advance licence scheme for seconds and defective steel products available to exporters complaining of large-scale misuse, the user industry had been pressing for its continuation. The Director-General of Foreign Trade, Mr N.L. Lakhanpal, when contacted by Business Line was, however, non-committal. "We have received representation from the steel industry. The steel makers and the user industry have different opinions. I cannot say what the final decision could be," Mr Lakhanpal said, adding that if the user industry could source cheap raw material domestically, no one would go for imports at all. According to the sources, the majority of the exporters importing seconds steel under the advance licence scheme are selling the material as prime rate steel in the domestic market. As a result, firstly, domestic manufacturers are suffering. But more importantly, this steel is being used by unsuspecting manufacturers, as a result of which the final product suffers in quality.
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