With the announcement of increase in infrastructure spending in FY11-12 and rise in export duty on key steel raw materials, the Indian steel industry surely has a reason to cheer the current Budget.
Moreover, the finance minister has proposed the issuance of tax-free bonds worth R 30,000 crore for infrastructure financing. He said the government intends to spend R 2.14 lakh-crore as budgetary support for the infrastructure sector in 2011-12.
CS Verma, chairman, Sail said, ?The Budget is growth-oriented and has various positives for the steel industry. The government?s continued thrust on development of infrastructure and manufacturing will help steel demand in the country grow. Besides, higher support for the housing sector is a positive step.?
Moreover, aimed at discouraging iron ore exports, the FM has proposed to levy 20% ad valorem duty on all types of outbound shipment of the key steel making raw material.
?Iron ore attracts an export duty of 15 % in the case of lumps and 5% in the case of fines. This is a natural resource, which needs to be conserved. I propose to enhance the rate of export duty for all types of iron ore and unify it at 20% ad valorem,? the FM said.
Moreover, export duty on iron ore pellets is also withdrawn in order to encourage exports only after the necessary value-addition.
?Higher export duty on iron ore has been a long pending demand of the steel industry and the Budget has taken care of the issue by increasing the export duty to 20%. This should ensure higher availability of iron ore for the Indian steel industry. Again, withdrawal of export duty on pellets should encourage installation of pellet plants by mining companies. More pellet plants in the country will also benefit the industry,? Verma added.
The domestic steel industry is, however, disappointed as its long standing demand of being accorded infrastructure status was not fulfilled. The industry had also requested the finance ministry to raise import duty on HR coils to 10% from the current 5%.