Even as the steel ministry is sympathetic to steelmakers’ plea of bringing down the extant 2.5% import duty on coking coal to nil in the Budget on the ground that the raw material is not adequately available domestically, the finance ministry might turn down the proposal, leaving domestic firms to find other ways to improve efficiency and competitiveness.
This might not come as a music to the steelmakers’ ears particularly at a time when the prices of coking coal have skyrocketed to over $270 a tonne now from $92 in July. Though there are a couple of reasons for the price to tumble down in the coming days, duty reduction might have helped the struggling domestic steel industry to reduce their costs of production and see their bottom-line little better.
Sources said the finance ministry is unlikely to offer any more sops to the steel industry after giving a series of them in the last one year. In stead, it wants the industry to stand up on its own feet and enhance their competitiveness on the techno-economic parameters. The North Block has also to keep its revenue streams steady to fund the developmental schemes and projects for well-being of one and all. In fact, there are talks of pruning basic customs duty on HR coil to 10% from 12.5% now.
Sources in the steel ministry argued that since Indian steel makers are required to import almost two-thirds of their requirement in the absence of inadequate supply domestically, there is no reason to burden them with additional cost push. On the other hand, levying of additional customs duty on finished products could have served the dual purpose of ensuring additional revenue for the exchequer and protecting the domestic industry from the onslaught of more imports.
Meanwhile, the recent spike in the prices of coking coal has left them in the lurch as the spike in the prices have resulted an additional Rs 6,000/tonne cost push for the steelmakers. It generally takes 0.9 MT coking coal to produce 1 MT steel. India imports coking coal from various countries, including Australia, South Africa and others.
There had been no duty on coking coal imports for several years in the past, the government had in 2014 imposed 2.5% duty, mainly to rationalise the duty structure on all varieties of non-agglomerated coal.
India has over 300 billion tonnes of coal reserves, coking coal constitute just about 10% of the total kitty and a large chunk of that remains unexplored till date. On the other hand, in sync with the increase in steel production, imports of coking coal in the country have been on the rise for the last few years. While India imported 19.5 MT of coking coal in the 2010-11 fiscal, the imports went up to 43.5 MT in the last fiscal, up 123%.
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