New Foreign Trade Policy may erode Competitiveness of Indian Ferro Alloys

New Foreign Trade Policy (FTP) reduces export incentives given to Indian Ferro Alloy Industry

The competitiveness of Indian Ferro Alloys in international markets may be eroded further by the recent reduction in export benefits to the sector under the Merchandise Exports from India Scheme (MEIS), announced under Foreign Trade Policy (FTP), 2015-2020.

What is MEIS?

Earlier, there were 5 different schemes under Foreign Trade Policy, 2009-2014 such as Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri and other. Now, all these schemes have been merged into a single scheme namely Merchandise Export from India Scheme (MEIS) under Foreign Trade Policy, 2015-2020.

How will it work for Ferro Alloy Industry

Earlier, Indian Ferro Alloy exporters were used to get an incentive of 4% under Focus Product Scheme and a duty draw back of 1.4% , which has now been reduced to 2%  under MEIS and 1.4% Duty Draw Back, based on category of the country, w.e.f 1 Apr, 2015. For countries falling under category ‘A’ will not be eligible for any incentive, for category ‘B’ it will be 2% and for category ‘C’ it will be ‘nil’.

Categorization of Countries

For grant of rewards under MEIS, countries have been categorized into 3 groups, with rates of rewards ranging between 2% and 5%. Category A consists of 30 traditional markets — 28 countries of the European Union, Canada and US. While, category B consists of 139 emerging and focus markets – 55 African countries, 45 countries from Latin America and Mexico, 12 CIS countries, 13 West Asian countries and Turkey, 10 Asean countries, Japan, South Korea, China and Taiwan. All other 70 markets are placed under category C.

This means new ‘MEIS’  has effectively reduced incentive on Ferro Alloys by 2% when exported to emerging markets like Japan, Korea, ASEAN countries and reduced by 4% when exported to traditional markets like European Union, US and Canada.

Major setback for the Ferro Alloy manufacturers is export realizations, which are set to fall by USD 15-30/MT on Mn Alloys and around USD 25/MT for Ferro chrome, he further added.

“Total rebate for exporting Ferro Alloys is 3.4% (2% under MEIS & 1.4% duty drawback), which was previously 5.4%. (4+1.4%). Also, exclusion of European union and US will be a major setback for Indian Ferro Alloys Industry,” said a market participant.