Indian companies exporting steel to their foreign subsidiaries for value-addition have been put in a fix by the recently-imposed 10% average export duty on steel.
The steel ministry has already urged the finance ministry to review the export duty, which was notified on May 11, two days after the industry agreed at a meeting with the government to roll back prices.
The notification imposes a 15% export duty on hot-rolled steel and TMT bars, 10% on cold-rolled steel and 5% on galvanised steel.
Rajeev Jhawar, managing director of Usha Martin Ltd, one of the world?s top producers of wire rope, said the export duty will push up the cost of operating the company?s Thailand subsidiary, as the wire rods it feeds its plant there would attract the 10% export duty.
Usha Martin, which makes speciality steel and wire rope, has three facilities in India and one each in the UK, Thailand, UAE and the US. It exports 30,000 tonne of wire rods to its Thailand plant alone.
?We expect the government to act with good sense and help Indian companies operate foreign subsidiaries in a cost effective way,? Jhawar said.
Tata officials said that Tata Steel had planned to cut the operating cost of its European subsidiary Corus by exporting relatively low-grade steel from India but the export duty may negate this advantage.
The industry is waiting for a final decision on the export duty, after which it would decide whether to stick to the rolled back prices or emerge with a new pricing. The government, industry spat over prices had been going on since January after steel producers raised prices citing an increase in raw material and freight costs. Following pressure from the government, the industry agreed to roll back prices three times even as it raised prices for three times.