After slashing the import duties on edible oil, the government?s radar has moved on to steel prices. It is mulling the abolition of import duty on all grades of steel. The current tariff is about 5%. The steel ministry has forwarded a proposal to this effect to the finance ministry, official sources say.
India imports 6.5 million tonnes of steel a year, less than 13% of the domestic consumption of 51 million tonnes.
Current domestic prices are about $950 per tonne, about $50 more than the international steel prices. Industry analysts say without duty, steel imports could rise to around 9 million tonnes.
Steel has a major inflationary impact, affecting the cost of automobiles, consumer durables and construction.
If approved, this would be the second attempt in recent years to check steel prices through import duty cuts. Last time, the previous National Democratic Alliance government had slashed the import duty from around 15% to 5% in 2004, months before the general elections, which it lost.
Sources said the steel ministry would prefer abolishing the import duty on steel rather than levy an export duty of 10%, since exports would still add to the net realisation of the producers. Prices of steel in the international market are rising steeply. Industry officials say even if the government levies an export duty of 10%, the producers would end up having a net realisation since prices are rising fast.
Steel prices in the last four months (December-March) have risen in the international market from an average of $300 per tonne to $900 per tonne. In comparison, prices in the domestic market have risen only by Rs 6,000 during the four months to the current range of Rs 33,000-34,000 ($950) per tonne.
A major trigger for the flaring prices has been a rise in the prices of key raw materials like iron ore and coking coal. Long-term deals for iron ore in February saw a rise of 65%, which means prices in the spot market have nearly doubled. Similarly, coking coal prices have trebled after December to touch $310-320 per tonne.