[India #2] Export Tax & Price Volatility: The Policy Risk
Trading with India is like riding a roller coaster.
One day, the price is attractive. The next day, the government imposes a sudden tax, and your margin disappears.
In India, the biggest risk is not the market; it is the Government Policy.
Today, we analyze the "Yo-Yo" nature of Indian export taxes and how to protect your contract.
1. The "Midnight Shock" (May 2022)
Every steel trader remembers May 22, 2022.
To control local inflation, the Indian government suddenly imposed a 15% Export Duty on finished steel products effectively overnight.
📉 The Impact:
- For Exporters: Indian mills suddenly had to pay 15% tax. They canceled overseas contracts via "Force Majeure."
- For Importers: Buyers who relied on Indian steel were left with empty hands. Prices in other regions spiked.
- The Reversal: Six months later (Nov 2022), the tax was removed just as suddenly.
2. The "Yo-Yo" Policy: Why it Happens
India prioritizes domestic infrastructure ("Make in India") over exports.
Whenever local steel prices rise too high (fueling inflation), the government restricts exports.
When local demand cools, they encourage exports again.
The Lesson: Indian steel prices are highly political. Do not expect stability.
3. Survival Strategy: The "Change in Law" Clause
If you are buying from India, you must protect yourself from these sudden tax changes.
Never sign a standard contract. Insert this clause:
🛡️ The Protection Clause:
"Any new imposition of taxes, duties, or levies by the government of the origin country after the date of contract signing shall be for the account of the Seller."
Without this line, the seller might try to pass the 15% tax cost to you, or cancel the deal entirely.
Final Thoughts
India is a volume game, but it is risky.
Avoid long-term fixed-price contracts. Stick to Spot Deals (shipment within 30 days) to minimize exposure to policy shifts.
Profit is important, but predictability is vital.
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