OPINION: No light at the end of the tunnel for engineering exports
One of the most turbulent and trying times is going through engineering exporters. Of India’s total merchandise
exports of $320 billion, the engineering industry contributes more than 25% and is one of the country’s largest
generators of jobs. Engineering exporters must compete with China, Vietnam, Taiwan, Malaysia, and these
countries have the best infrastructure, fast and cost-effective ports, cost-effective domestic transport,
and significant government cash subsidies.Unfortunately, despite being such an important market,
engineering exporters are now on the verge of losing a major portion of their industry to other nations,
leading to large-scale layoffs and permanent factory closures.
The urgent steps to be taken to save the engineering sector are listed below:
1. Steep rise in prices of steel
The greatest challenge faced by exporters is the unprecedented continuous rise in the price of steel.
In July 2020, Cold Rolled Coil prices ranged from Rs 43,000 to Rs 44,000, up to Rs 65,000 per MT, which is an
increase of almost 50%. No customer can withstand such a rise and, because suppliers from other countries have
not raised their prices, foreign customers are not able to bear such high costs. To save this hard-built market, engineering exporters should get steel at least 20 percent lower than the current price.
2. Abnormal increase in ocean freight rates
With the rise in container freight prices by 70 to 80 percent, another huge shock came. Freight to the US East
Coast for a 40 ‘container increased from $2,200 in June 2020 to almost $4,000, with a rise of almost 80 percent
now. Much like a cartel, shipping lines work and negotiate for freight rates that are never heard of and not
affordable. Indian exports would come to a grinding halt if prices are not brought under control.
3. Increase in cost of other inputs
Since July 2020, the price of corrugated boxes has risen by almost 25 per cent. In such a short span of time, this
kind of rise is absolutely prohibitive and needs to be rolled back.
4. Non-issuance of the 2020-21 MEIS Entitlement Certificate
Exporters were unable to apply for MEIS export licences from 1.04.2020 to 31.12.2020.
The delay in the issuance of these licences caused enormous cash flow problems, especially for
MSME exporters, since the sum was taken into account at the time of the quotation.
The government should issue MEIS immediately to provide much needed relief.
5. Fresh Remission of Export Scheme Duties and Taxes (RoDTEP) announced as of January 2021
In January 2021, the Government announced a new RoDTEP scheme for exporters, but no prices have
been announced to date and exporters have no visibility to impede their competitiveness in the market.
Government should immediately declare the prices with increased allocation for
the RoDTEP Scheme so that exporters can achieve greater market share.
If not managed, the current onslaught of unprecedented increases in all cost parameters would completely derail
the engineering sector. Huge numbers of units have already begun to refuse orders and are on the
verge of shutting down, causing mass unemployment, unless such emergency relief measures are announced.
The government should consider saving India’s largest contributor to the export basket of goods and announce
immediate relief measures.
Patient on the bed of death. It will not work with mere mild oxygen.