WTO-compatible tax breaks in demand

IN FOCUS/ Foundry & Castings Products

The Indian Foundry Association (IFA) along with the EEPC would like Section 80HHC which provides tax incentives to export houses to be reintroduced in the next budget.

IFA has also asked for facility for refund of transaction cost at 10 per cent.

"WTO has a provision that allows government's of countries with less than $1000 per capita income to provide tax and other incentives to export houses. This could allow the Indian government to revoke incentive to the foundry exporting houses which have been hit by Chinese competition specially in European markets," explained Ravi Sehgal, chairman EEPC, eastern region.

Indian foundries had become uncompetitive in international markets owing to high pig iron prices despite reduction in price of coking coal used to make pig iron.

"Pig iron manufacturers raised prices from Rs 13,000 per tonne to Rs 20,000 per tonne last year when price of Chinese coking coal increased from $80 per tonne to $160 per tonne. Prices now have declined to $80 per tonne but pig iron prices have been kept at around Rs 17,000 per tonne as manufacturers have not passed the benefit of falling coke prices to consumers. Indian units cannot compete against China ones as a result," he explained.

Sehgal said Indian units lost market share in Europe to Chinese units, with Indian exports falling from $25 million to $5 million. Foundries also lost 25 per cent market share in Australia. Exports to USA alone rose from $130 million tonne to $150 million tonne.

The Persian Gulf market was flat.

"In the American market, China is slowly gaining ground," he warned.

The government does not at present offer any special incentives to boost exports of foundry products.

Scrap supply was also short of demand and prices were high as a result. Meanwhile, a new foundry park is coming up in West Bengal.

It has attracted 150 units till date, all being members of the Indian Foundry Association (IFA).

The 1,550 bigha park is linked to a 500 bigha plot for allied and services sector units, a 100 bigha pig iron plant and a captive power generation plant spread over 80 bigha. Another 300 bigha would be acquired by March 2005 to house more units.