In their pre-Budget consultation with the steel ministry, domestic steel majors such as JSW Steel, Essar Steel and others have asked for abolition of 2.5% extant import duty on coking coal, a scarce commodity in the country. The steel ministry, sources said, will back the proposal and refer it to the finance ministry for consideration in the Budget.
It generally requires 0.9 tonne of coking coal, an important raw material, to produce one tonne of steel. India imports coking coal from various countries, including Australia, South Africa and others. Though 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.
“Though India does not have enough coking coal and we need to rely largely on the imported raw material to run our plants, the 2.5% import duty defies any logic. We have sought for scrapping the duty,” a source present in the meeting, presided over by the steel secretary Aruna Sharma, told FE.
Though 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%.
According to a PwC-ICC study, domestic steel industry consumed 66 MT steel in FY15, clocking a three-fold increase in the consumption between FY06 and FY15. Imported coal accounted for approximately two-thirds of the total coal consumption by the steel sector in India. Considering India’s steel production projections, the domestic steel industry would require 96 MT coking coal by 2020.
Sources also said the industry has flagged the need for ensuring steady supply of iron ore at affordable prices and urged the government to initiate steps for increasing the demand for steel in the domestic market.