EXPORTERS OF SOME ITEMS COULD BE EXEMPTED IF THEY IMPORT SEMI-FINISHED STEEL
THIS may come as a big relief to steel makers exporting value-added products. The government is considering to exempt cold rolled coils (CRC), galvanised products and tubes & pipes from the levy of 10% export duty if such products are exported against import of semi-finished steel (hot rolled coils or HRC). Tata Steel, SAIL, Bhushan Steel, Uttam Galva and a host of secondary steel producers would be among the major beneficiaries.
The measure is to improve supply of steel in the market and prevent consumption of domestic semifinished steel for the purpose of exports. If implemented, this would be the first roll back by the government in its initiative to tame rising steel prices.
A proposal in this regard is being considered by the finance ministry for inclusion in the notification on recently announced export duty on steel, an official source said.
Over two million tonne (mt) of domestically produced HRC is used for making high-end steel products meant for exports. Relief from export duty would enable more companies to source HRC from overseas. This could release an additional two mt of steel in the domestic market, thereby preventing any price rise accruing from shortages.
The nodal steel ministry has also given a proposal to the finance ministry to make necessary changes in the notification (on measures for the steel sector to contain inflation) exempting steel exports using imported inputs from any further levy of duty.
“Since taxes on export of various steel items have been announced, it would be necessary to exempt from such taxation the export of CRC, galvanised products and pipes and tubes which are exported against import of HRC under advance licensing scheme (ALS). In the absence of such exemption, it may not be economical for the manufacture of highend products to import HRC under ALS, add value and export value-added products after paying the proposed taxes,” steel ministry has written in its memorandum to the finance ministry.
Responding to the discussion on the Finance Bill 2008-09, finance minister P Chidambaram last week had announced imposition of 15% export duty on hot rolled steel products, 10% on cold rolled steel products and 5% on galvanised sheets to disincentivise exports and contain the domestic demand-supply gap. It is, however, felt that the move would be counter productive to steel ministry’s initiative recently where it got an agreement from steel makers to source their entire requirement of HRC from overseas for producing high-end products for exports.
The country exports about 4.5 mt of steel. Around 3 mt of this is HRC, which is the prime raw material for various industries. While direct export of HRC has now been disincentivised through a 15% export duty, value-added products would also use imported steel.