Need to cut duty on imports of nickel, scrap for steel

Written by Sushim Banerjee | Sushim Banerjee | Updated: Jul 8 2014, 05:33am hrs
The name stainless creates the impression of a superior and exclusive member in the family of steel. Whenever we talk of the menace of corrosion or want to decorate our home or office with elegant, aesthetic and ever shining products, we think of chrome, nickel and scrap-made steel known as SS, in which India has already occupied the second position in consumption and third in production globally.

At present, however, the stainless players like mild carbon producers are suffering from subdued demand, high raw material costs, cheap imports from China and high debt servicing costs.

It is widely perceived that a feel-good scenario has emerged immediately after the new government came to power. Political stability with a promise of good governance, it is believed, can take care of a multitude of problems confronting the industry. The commencement of some stalled projects, the majority of which are embroiled in forest and environment clearances and land acquisition, is a silver lining.

While supply bottlenecks are tackled on a war footing, it is imperative that substantial investment in transport network, power and other energy inputs, urban infrastructure, ports, communication, oil and gas pipelines, storage etc. be made. It has to be led by the government and supplemented by the private sector in specific areas, taking advantage of the PPP route which needs revision to make it more attractive. Although share prices reflect an upbeat mood, it is yet to engulf the industry at large.

All eyes are therefore on the Budget. It is of great significance that the government appreciates the role that a rejuvenated industry can play to take the country back to the rails. Like in the US and China, where the government has been responsive to the constraints faced by the industry, the budgetary allocation of resources to commodity sectors of the economy by judiciously pruning subsidies without hurting the needy segment of our population will make a huge positive impact on the industry. Secondly, the industry, where massive investment is already lined up with hard-earned cash reserves and funds borrowed at high internal costs, should be provided with fiscal measures that will make cheap imports from countries undergoing excess capacity scenario at least unviable.

Talking of SS, import of 304 grade with only 6.5% nickel from China is making a mockery of quality consciousness of Indian buyers and is hurting the domestic industry, which is shifting from the traditional utensil grade (200 series) to the industrial (auto, railways, transport, construction, power) grades (300 & 400 series).

This process of moving up the value chain and becoming globally competitive must be rewarded by capping cheap imports. The government was sympathetic to the domestic SS industry and imposed AD duty on imports of CRSS (flat) and a safeguard duty on imports of HRSS of 300 series from China. But ingenuous Chinese exporters benefiting from subsidised power and bank loans are circumventing AD by adding boron and thereby declaring the products outside the purview of duty. As a result, imports have gone up by more than 70% in three years and currently constitute around 30% of the total SS market.

There is therefore a strong case for reducing the duty on imports of nickel and scrap for SS from the current 2.5% to nil and enhancing the customs duty on finished HR and CR from the current 5% to at least 7.5% as applicable on flat carbon steel, if not more to 10% to stave off the rise in imports and offer a helping hand to the industry.

The author is DG, Institute of Steel Growth and Development. The views expressed are personal