Responding no doubt, to the Union steel ministry's recommendation for lowering import duties on steel-making raw materials, the revenue department granted a five per cent concession in customs duty on ferro nickel in last year's Budget. It simultaneously increased the import duty on two other forms of nickel, unwrought nickel and nickel oxide sinter by five per cent to 15 per cent.

Stainless steel producers, who paid a uniform 10 per cent import duty on the three variations of nickel till February 1999, were since then compelled to pay 15 per cent duty on two grades of nickel and five per cent on one.

Obviously, the industry resorted to importing ferro nickel, which is less easily available, less commonly traded and when available, always commands a premium in the market.

According to someindustry sources, the premium was $500 a tonne or more. Nickel incidentally contributes to the bulk of the cost of producing stainless steel.

Ironically, ferro nickel contains the least amount of nickel out of the three grades commonly used by stainless steel producers. Ferro nickel contains between 15 per cent and 55 per cent nickel, compared to nickel oxide sinter, in which the percentage of nickel usually ranges between 75 per cent and 90 per cent. Unwrought nickel, not alloyed is 99.9 per cent pure nickel.

In its pre-Budget representation to the finance ministry last month the Indian Stainless Steel Development Association (ISSDA) pleaded for bringing down the import duties on unwrought nickel and nickel oxide sinter to five per cent from 15 per cent at present. The club of stainless steel producers and related industries said ``the duty relief sought to be given to the stainless steel and alloy steel industry had been vitiated'' by the anomaly.

The association also pointed out that the differentialexcise duties on stainless steel producers was both detrimental for revenue collection and for the industry. Primary producers of stainless steel, like the Steel Authority of India Limited's (SAIL) Salem Steel Plant and Jindal Strips Limited pay 16 per cent excise. The re-rolling industry for cold rolled strips (called `patta-patti') are required to pay Rs 15,000 per machine per month.

Almost all the 4.75 lakh tonne of patta-pattis made in the country go into the production of stainless steel utensils, which are exempt of excise duty. The primary producers contribute 2.5 lakh tonne of flat bars that go into the making of the narrow cold rolled strips (patta-patti) and the remaining 2.25 lakh tonne of flat bars come from small induction furnaces.

The ISSDA claims that the absence of excise gate passes for re-rollers, had resulted in "large-scale (tax) evasion by small manufacturers of stainless steel flat bars." The association has sought a uniform excise duty of eight per cent on all stainless steelproducers, with a two per cent surcharge if necessary. Salem Steel Plant has suggested reducing the excise duty on just cold rolled stainless steel coils and sheets to eight per cent ad valorem.

Since Salem Steel and Jindal Strips are the only producers of cold rolled stainless steel coils in the organised sector, the two companies face `unfair competition' from the others, who only pay a flat rate of duty on capacity.