CUSTOMS CUT TO BENEFIT SECTOR; STEEL PRICES MAY COOL OFF
PROJECT IMPORTS GOT A SHOT IN the arm with the government slashing customs duty from 7.5% to 5%. Projects in the irrigation, steel, oil and gas, pipeline and mining sectors which bank on imports will benefit from this, especially with lower costs making companies source more from abroad.
The reduced customs duty will be available for select items. The list includes items of machinery like prime movers, instruments, apparatus and appliances, control gear and transmission equipment as well as raw materials needed to manufacture these items.
KPMG executive director Arvind Mahajan said projects will get a boost, especially in midstream, pipeline and steel sectors. “For power projects, the FM has announced a special countervailing duty (CVD) of 4%, making it expensive to import project cargo. Probably, this is to help local companies like Bhel,” he said.
SAIL chairman SK Roongta said the lowering of customs duty will help the steel sector. “Reduction of duty on project imports would have a positive impact on steel and capital-oriented industries,” said Tata Steel MD B Muthuraman.
However, the decision to introduce 4% special CVD for power sector imports has stirred a hornet’s nest. JSW Energy vicechairman NK Jain said that for power generation companies which want to set up more projects, it is a disappointing Budget. “The Budget has proposed to decrease CVD by 2% to 14%, but imposed 4% special CVD for specified projects in the power sector, which are below 1,000 megawatt (MW) capacity. Eventually, indirect taxes have increased by 2% for power projects,” he said. Scrapping the 5% customs duty on steel scrap may benefit secondary steel makers. JSW Steel MD Sajjan Jindal said the cut will help steel players using induction furnaces.
However, a senior Ispat Industries official said the cut would have only a marginal impact. “It will lead to Rs 60-70 crore savings per annum on import of scrap for Ispat, as it is the largest importer of scrap of about 0.6 million tonnes,” he said.
The other major impact on steel sector is an excise duty cut from 16% to 14% . It will bring down prices marginally for steel used in construction and roofing. Also, reduction in project import duty would help the industry tide over the rising cost of input marginally.
Said Srei Infrastructure vice-president Hemant Kanoria: “Though the finance minister is confident of 9% GDP growth, to my mind, unless he responds favourably to the industry’s demand to give a boost to infrastructure, we will not be able to mobilise the requisite capital for building of infra – the foundation of India.”
Lowering of excise duty on automobiles and two- and three-wheelers will also promote use of steel. “The government’s continued commitment towards ensuring double-digit manufacturing growth by carrying on with the ongoing reforms process looks reassuring, especially for an infrastructure sector like steel,” Essar Steel Holdings CEO J Mehra said.
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STORY SO FAR
Key infrastructure development in roads, power, ports, airports, hamstrung by red tape and lack of investment over the years Companies have raised funds through various routes to finance their expansion plans. Construction companies raised an estimated $3 billion last year
Implementation still remains a problem due to fluctuating government policies