STEEL industry may not get further protection from surge in steel imports in the forthcoming Budget. The steel ministry has proposed status quo with respect to 5% Customs duty on finished and alloy steel, ignoring demands made by primary steel makers. It would mean added pressure for domestic steel companies which are already expecting lower margins with a price surge in inputs like coking coal and iron ore.
In its pre-budget memorandum to the finance ministry, the steel ministry has suggested that 5% duty on steel should be maintained at the current level citing a comfortable demand-supply situation. The ministry, however, did not account for 78% increase in imports during 2007-08 (April-November period) as against the same period of previous fiscal. This is the single largest rise in steel imports over last few years.
“Though the steel imports is only marginal at 3.16 million tonne (mt) till November 2007, the trend is disturbing that should not have been ignored by the steel ministry. This becomes important, especially, at a time when rupee is hardening,” said a senior official of a private sector steel company.
While status quo on customs duty may not be a welcome move for primary producers, sources said the duty atleast would be maintained and not withdrawn under pressure from secondary producers. The secondary producers like rolling and rerolling mills and makers of other value added products feel that 5% duty should be withdrawn to bring about more true pricing for domestically produced steel.
The Budget, however, may provide a major relief to the steel industry through lower duty on inputs like melting scrap, zinc, coking coal and refractories. The steel ministry has proposed that duty on melting scrap and stainless scrap be brought down to 0%. A 5% duty was imposed on scrap couple of years back to prevent dumping when its prices had fallen sharply.
It has also suggested that 5% customs duty on coking coal and refractories should be withdrawn while 5% duty on Zinc, another raw material used in steel making be reduced to 2% level.
To curb exports of iron ore, the ministry has said export duty should be levied at ad valorem rate of 10-15% freight on board (FoB) value rather than the present fixed rate. Last Budget introduced export duty on ore at a fixed tariff of Rs 300 per tonne for grades over 62% and Rs 50 for lower grades