Apex industry body ASSOCHAM has mooted a proposal to the Union Government to constitute an appropriate authority either at the Central or state level to fix the ceiling on road freight rates and breaking local monopolies.
“Transporters charge exorbitant rates for movement of iron ore and other raw materials from mines and ports to steel plants, besides they also prevent free competition through their dominating presence in local areas,” said ASSOCHAM highlighting the double whammy being faced by the domestic steel sector.
ASSOCHAM has also submitted various suggestions to the Union Steel Ministry to bring back India’s steel sector on growth trajectory.
“There is an urgent need to withdraw import duty of five per cent imposed upon metallurgical coke and coking coal to restore competitiveness of the domestic steel industry,” ASSOCHAM highlighted in a paper submitted to the Union Steel Ministry highlighting various issues that are restricting growth of the sector.
It also urged the Steel Ministry to bring down rate of royalty on iron ore to reduce the cost of raw materials for steel plants.“About 15 percent royalty rate on iron ore together with district mineral foundation (DMF) at 30 per cent translates into royalty burden on end user of 19.5 percent of iron ore cost,” it noted.
The apex chamber requested to reduce the DMF rate for new mines from 10 percent for captive consumption of iron ore. Considering that higher transport costs result in higher costs of production of steel in India, there is an urgent need to bring down freight tariff rates by up to 25 percent across all raw material and steel products to gain competitive edge.
It is also imperative to prevent import of cheap steel in India through a combination of minimum import price (MIP) and import duties/safeguard duties on a sustained basis.
ASSOCHAM has also suggested that inclusion of pig iron, sponge iron and billets in the list of products covered under MIP since protection for upstream primary reduction of iron is equally vital.
Further, banks should extend working capital loans to steel companies on a priority basis, especially those which have not defaulted on interest payment, while structural problems relating to high debts of various steel companies would take time to resolve.
There is also a need to create a special funding mechanism for providing capital for brown-field expansion of capacities at the existing steel mills more so as commercial viability of brown field expansion of steel plants is significantly higher than greenfield plants.
Sharing certain budget proposals, ASSOCHAM has reiterated its demand to accord strategic industry status to steel sector. Besides it also suggested to bring import duty on coking coal and metallurgical coke down to zero.
A comprehensive package for steel sector should be unveiled encompassing special financing arm for providing capital for expansion of capacities, easy extension of working capital loans, long-term policy on freight tariffs and augmenting transportation infrastructure capacity to meet needs of steel production.
Besides it should also include total revamp of process for grant of statutory approvals for mines and steel plants, long-term policy to prevent cheap imports of steel products and security of raw materials.