Long-standing issues like import duties on input materials, dumping challenges, cesses and taxes have been bothering the Indian steel industry. Some of these have been partly addressed in previous Budgets. Challenges, however, still remain. SteelMint takes a look at some of the key issues the steel industry wants addressed in Union Budget 2022-23.
Inclusion of iron and steel in Rodtep scheme: The steel industry has requested the Union government that all iron and steel products under Chapter 72, including ferro alloys and Articles of Iron and Steel under Chapter 73 be included in the Remission of Duties and Taxes on Exported Products (Rodtep) scheme on priority basis. “This not only will bring the steel industry at par with our global competitors but also help the country in boosting export competitiveness of the downstream industries using steel as a major input raw material,” the Indian Steel Association (ISA) said.
Another leading industry source said, where Rodtep is concerned, industry bodies are keen that the steel industry should be brought within its ambit. “There are cesses and duties, as on electricity, which differ from state to state and which the players are not able to get back. These make Indian steel 9-10% costlier in the global markets. Even if Rodtep cannot offset losses by 9-10%, it can at least make the steel industry cost competitive,” the source revealed.
Removal of customs duty on coking coal: This has been a long-standing demand of the industry since India imports more than 80% of coking coal. This fuel has 2.5% duty (1% basic custom duty plus 1.5% agriculture and infrastructure development cess). It may be recalled that in Budget 2014-15 the exemption available to coking coal was removed by the government by making it at par with other coals and thus the 2.5% duty was imposed along with the cess.
“This amendment adversely affected steel manufacturers in India and the ‘Make in India’ drive,” says FIMI. Coking coal is one of the principal raw materials used in making coke and thus forms a major part of the final price of steel. The consolidated levy of 2.5% of basic customs duty and agriculture and infrastructure development cess has adversely affected the costing of steel, as per FIMI.
“India being a developing economy it has to be cautious about its infrastructural development. This was the intention with which the exemption had been granted to coking coal,” reminds FIMI.
ISA, while seeking a reduction in the BCD and cess, reasoned, “The availability of these input raw materials is very low and necessary for ‘Atmanirbharta’ for a core industry like steel.”
Withdrawal of 30% export duty on Fe58% + iron ore: There has been continuous increase in the export duty on iron ore from nil in FY2008-09 to 5% in FY2009-10 and then to 20% in March 2011 and finally to 30% in December, 2011. As per FIMI, “such a high duty has rendered exports unviable”.
It may be recalled the government had abolished the export duty only on iron ore up to Fe58% in Budget 2016-17 but the export duty continues to be 30% on iron ore above Fe58%.
Complete withdrawal of the export duty on iron ore above Fe58% is sought in Budget 2022-23.
Due to high incidence of export duty on iron ore, exports had sharply declined from 117.37 million tonnes (mnt) in 2009-10 to 57.22 mnt in 2020-21. There is stockpile of 121mnt of iron ore at mine-heads mainly in Jharkhand and Odisha and which is estimated to be mainly of grade Fe58-62%. All iron ore mines in Goa which have been exporting iron ore of <58% Fe are closed since March, 2018. Hence, there are no exports of such ore from Goa. Domestic demand for pellets and sponge iron as well as from the pig iron industry is for iron ore containing above Fe62%.
Thus, FIMI feels abolition of the export duty on Fe58% will help liquidate to a large extent the huge stockpile of ore at mine-heads which will result in enhanced foreign exchange earnings besides more production of iron ore.
Reduction of import duty on graphite electrodes: The steel ministry has made a pitch for a reduction in the current 7.5% import duty on graphite electrodes to 2.5%.
A leading industry source said such a plea may have originated in the secondary sector, which may want to keep cartelization at bay and domestic prices stable since domestic manufacturers of GE are limited. India’s GE production in 2021 was at around 140,000 t, as per Steelmint’s estimates, against 100,000 t in 2020. Domestic annual consumption is pegged at 60,000-65,000 t. GE producers generally prioritise domestic demand over exports. India’s imports of GE increased in 2021 to around 10,000 t against around 7,000 t in 2020, which allowed producers more material for exports.
Notifying anti-dumping duties: The ISA seeks continuation of anti-dumping duties on HR and CR steel, colour-coated steel and wire rods recommended by DGTR after sunset review investigation following due process. This is sought so that the steel industry does not suffer from surge in imports at predatory prices.
Dilip Oommen, President, ISA, said: “As a vital contributor to the economy, the steel industry looks forward to the Union Budget 2022-23 for more fund allocation and front loading for government infrastructure projects that will augment the metal’s demand, apart from zero import duty on input raw materials for a level playing field. These measures are imperative to promote domestic production that will give a much-needed push to self-reliance or ‘Atmanirbharta’, besides providing an edge against foreign steel manufacturers. There is also an immediate requirement of a policy on green economy and green financing for future steel capacity building while ensuring a level playing field.”
Looking ahead
The steel industry’s submissions aim to facilitate growth in the installed capacity from the current 144 mnt to 300 mnt as enshrined in the National Steel Policy, 2017.
At present, two-third of imports from countries having FTAs with India arrive at zero basic customs duty. These manufacturers do not incur similar costs as their Indian counterparts. The industry thus seeks a level playing field.
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