Centre Mulls Export Ban On Flat Steel Products, Iron Ore to Check Prices

Steel industry may be in for another shock with the centre now considering banning exports of falt steel products with a view to check rising inflation.

“If the prices of flat steel products are not being kept in check, either the export duty can be increased or a ban an exports can be considered to increase domestic availability,” committee of secretaries (CoS) observed in its last meeting, it also noted that the government may consider increasing export duty on long steel products and subsequently explore the possibility of banning iron ore exports to increase domestic availability. Steel prices have since January this year shot up by around 50%, adding to the double-digit inflation, which is hovering at a 13-year high of just below 12%.

The government had on June 13 exempted flat rolled products of iron and steel, including galvanized products pipes and tubes that attracted export duty ranging from 5 to 15% ad-valorem, from the purview of the export duty,

The rate of export duty on long products such as bars and rods, angles, shapes, sections and wires was also increased from 10 to 15% and a 15% ad- valorem duty was imposed on iron ore.

The CoS decided that the ministry of steel in consultation with department of revenue for increasing the domestic availability of steel and moderating its prices, The ministry will also consider proposals for implementation in early August when the three-month self-moratorium imposed by major steel producers to hold their price line expires.

The ministry will quickly undertake an analysis on the options available for moderating the prices of iron ore and submit it for consideration of the company of secretaries during the next meeting, they added. Till February, domestic prices of steel products were higher than the Freight on board (FOB) export prices, While in January the domestic ex-factory price of bars were $694 ore tonne and the FOB export price was $ 600 per tonne, After various fiscal measures annouched by the government in April-May, domestic prices have been continuously increasing. In June, domestic prices were $779 per tonne compared to FOB price of $ 1, 280 per tonne.

Steel secretary RS pandey had on Wednesday said in the absence of government
Intervention, domestic prices currently will have been higher by about Rs.10,000 to Rs.15,000 per tonne. According to steel ministry, the increase in steel prices during June was primarily.

Wheat Imports ruled out

The Union Goverment is not considering the import of wheat as it is hopeful of purchasing sufficient quantity from the domestic market to keep a buffer stock, the Agriculture and Food Minister, Mr Sharad Pawar, said here.

"We have no immediate plan for wheat import. The condition of wheat crop is good and the risk peiod is over," he told newsmen. "Efforts are on to be self-sufficient. Our approach is to improve production and productivity", Mr.Pawar added.

Replying to a query about whether the government was considering a bonus over and above the minimum support price (MSP) of wheat, Mr.Pawar opened that the current MSP was attractive enough to effect purchases from the domestic market.

Where did all the imports go?

Both export and import growth slowed in dollar terms in December, with the former down to 16 per cent (from 27 per cent) and the latter to 18 per cent (from 29 per cent).

The non-oil import growth was 15 per cent, less than half that of November. Both exports and imports are fairly volatile from one month to the next and hence a better idea of the underlying trend is given by looking at the direction of the 3 month moving average of the year-on-year. Interestingly, since the middle of the year, while export growth has strengthened, import growth has softened somewhat.

The dollar numbers are effectively distorted higher up by the rise of the rupee against the dollar (which has amounted to 12 per cent over the last year) and a better way of investigating what is really going on as it impacts Indian companies is to look at the rupee denominated numbers.

The chart shows the 3 month moving average of the year-on-year growth rate in exports and imports. Both series have slowed dramatically from the heights of mid-2006 when export and import growth was running at roughly 40 per cent in rupee terms.

The extent of the weakness in import growth, which is now running close to its lowest level since 2001, is particularly surprising. Although India’s exports have a high import content the risk is that domestic demand is also softening. We can be fairly confident that this is true of consumer demand (both durable and non-durable according to the industrial production statistics) but the real worry would be if capital spending begins to slow.

So far there is no sign of this in the industrial numbers, which extend to November and show still booming production of investment goods, but the latest FICCI survey reported signs of declining confidence in the sector.

This is something that needs to be watched carefully. As a result of the weakness in imports, India’s trade deficit shrunk in December and has shown year-on-year improvements in three of the last four months.

At the same time, the latest WPI numbers edged higher again to 3.9 per cent in the week ended 19th January from 3.8 per cent in the previous week and a low of 3 per cent in November. Base comparisons will soon become more difficult while everybody is waiting for some of the energy price rise to be passed on. Assuming this happens, we still expect the headline WPI rate to be back to roughly 5 per cent by mid-2008.

If this is right and the RBI is also faced with growing evidence of economic slowdown then tough choices will need to be made, particularly with the general election scheduled for 2009.

Our previous call was that the repo rate would be left unchanged throughout 2008, but we changed this in our last India Watch publication to include two 25 bps cuts, following hints from the RBI that it may be shifting towards more of a growth focus. This obviously didn’t translate into rate action this week, but we are happy to stick with the call.

(The author is an economist with HSBC)

India, Malaysia free-trade deal set for March 2009

KUALA LUMPUR (AFP) — Malaysia and India have agreed to try to finalise a free-trade agreement by March 2009, Indian officials said Wednesday after the first round of talks.

The two-day negotiations in the Malaysian capital established a roadmap for the deal which is aimed at "forging a long-term, comprehensive and dynamic economic partnership between the two countries", they said.

"Both sides will endeavour to complete the negotiations by March 2009," the Indian High Commission (embassy) said in a statement.

Malaysia has said that a bilateral pact -- which will cover trade in goods and services, investment and economic cooperation -- could boost its exports to India by 1.3 times, or 12 billion dollars, by 2012.

In 2006, India was Malaysia's ninth largest trading partner, ninth largest export destination and 17th largest import source.

The next round of talks will be held in New Delhi on April 10-12.

Deepak Fertilisers, Norway's Yara plan JV for ammonium nitrate

MUMBAI: Deepak Fertilisers and Petrochemicals Corporation has entered into heads of agreement with Yara International ASA for a joint venture to produce and market ammonium nitrate and speciality fertilisers in India.

Deepak Fertilisers will hold 51 per cent stake in the venture, and the balance held by Yara International, which is a $14 billion Norway-based global leader in ammonia, speciality and bulk fertilizers and ammonium nitrate, industrial gases and other diversified chemical and pollution control products.

The heads of agreement will be converted into a final agreement after a due diligence and the necessary company and regulatory approvals.

The JV's objective is to bring value addition and deeper knowledge, leading to better market economics for Indian customers. The JV will review opportunities for production, marketing and import of speciality fertilisers in Maharashtra and Gujarat. The new company will also invest in the 3,00,000 MT per annum of ammonia nitrate plant under construction at Paradip in Orissa.

At 2:36 pm, Deepak Fertilisers shares were up 19.97 per cent at Rs 141.20 on BSE.

Indian Americans make an impact on 'Super Tuesday'

Indian Americans, who have a sizeable population in crucial 'Super Tuesday' states like California, New York, New Jersey and Illinois, voted in large numbers in the presidential primaries to play a vital role in shaping the country's political landscape.

Indian American voters may have, in fact, been the swing voters in some of the closely contested states, thus contributing to determining the front-running nominees for president from the Democratic and Republican parties.

New Jersey, which traditionally held its primaries long after the races were more or less decided, was moved up to Super Tuesday this time.

According to a statement by the US-India Political Action Committee (USINPAC), which claims to be the political voice of 2.5 million Indian Americans, the community's support for Barack Obama inched closer in the past month to that for Hillary Clinton because he was able to win over the middle-class and younger voters. Clinton eventually triumphed in a close race between the two Democrats.

"The Indian American understands the importance of participating in the political process, especially this year, given New Jersey's significant relevance in helping to elect the nation's next president," said Rob Andrews, Democrat Congressman from the state.

In California, the 300,000 Indian Americans who work in Silicon Valley, looked for the most business-friendly candidate who believes that market forces are best and that outsourcing is not a "war against the (American) middle class" as CNN commentator Lou Dobbs would have you believe.

Outsourcing, however, has not been a big issue during the presidential race so far, partly due to growing concerns over domestic issues such as the looming recession. The leading presidential candidates have broadly been in favour of allowing the global economy to dictate the flow of jobs and business.

Clinton and Obama seek to reopen the North American Free Trade Agreement (NAFTA) to strengthen enforcement of labour and environmental standards. Mitt Romney, arguably the most pro-business candidate on the Republican side, has been vocal on renegotiating liberalised trade with China to stop currency manipulation that gives Chinese products unfair advantage.

"Indian-Americans like all Asian-Americans are poised to make a historic impact on Super Tuesday, especially in California where a fifth of the nominating convention delegates aare being contested, and where Asian-American voters continue to trend Democratic," Congressman Mike Honda, vice-chair of the Democratic National Committee, was quoted as saying by the USINPAC.

As the results came in, Clinton had taken the state and Romney's rival, John McCain, was the Republican winner.

In Illinois too the poll date was pushed up from March to Feb 5. Economic issues dominated in the state where Indian Americans are active players in commerce.

Jonathan Singh Bedi, an Indian American who lost in the legislative primary (Democrat) for District 5 of the state senate, gave voice to other issues of import to the Indian American community.

"The election will determine the outcome of the issues most important to our community including work visas, the erosion of our constitutional liberties, economic development, international trade and national security priorities," he said.

Obama won in his home state, Illinois.

In Georgia, Newt Gingrich, the former speaker of the US House of Representatives, praised the grassroots involvement of the Indian American community in the state.

"Indian Americans continue to make a significant contribution to our society, and the community itself has grown dramatically in its political sophistication and involvement, and thus in making its voice heard clearly," Gingrich, the Republican from Georgia, said in the USINPAC release.

Tony Patel, a Democratic candidate for District 47 in the Georgia general assembly, added: "As physicians, educators, business owners and hardworking citizens, we must exercise our right to vote and have our voices heard on important issues such as educational excellence, affordable health care and responsible government."

Obama won the Georgia primary and Mike Huckabee emerged the Republican winner in the state.

Pulses imports may total 3 m tonnes

Pulses imports may total 3 million tonnes in 2007-08 the Consumer Affairs Secretary, Mr.Yashwant Bhave, said. Private agencies also imported pulses from Myanmar, Canada, Mr.Bhave said the public sector undertakings (PSUs) like the State Trading Corporation (STC) the Minerals and Metals Trading Corporation(MMTC) and the Projects and Equipment Corporation (PEC), along with the National Agricultural Co-operative Marketing Federation(Nafed), had contracted to import 1.1 million tonnes of pulses since April 2007.

The Government provided 15 per cent subsidy to these bodies for import of the pulses, Mr.Bhave disclosed.