The construction grade steel like TMT and structural made by Steel Authority of India Ltd, Rashtriya Ispat Nigam Ltd and Tata Steel will benefit from the government?s move to across-the-board cut of 4% in the ad valorem Cenvat rate, which will be effected for the balance part of the current fiscal on all products other than petroleum.
For the iron ore producers, the major sop is the elimination of 8% export duty on export of fines and reducing the current 15% ad valorem export duty on lumps to 5%. Since 86% of iron ore export consists of fines, the move comes as a major relief for the producers. The iron ore producers now expect that exports in the current fiscal would be around last fiscal?s level of 104 million tonne. Earlier, the estimate was of around 80-85 mt.
Steel products currently attract an excise duty of 14%, which would now go down to 10%. Since most products are modvatable?where excise refund is given to manufacturers for value addition, the benefit would be restricted to long products like TMT and structural steel, which are used in the construction sector and are currently not modvatable.
TMT and structural steel is manufactured by state-owned steel companies like Steel Authority of India Ltd and Rashtriya ispat Nigam Ltd and the largest private sector steel producer, Tata Steel. It is expected that prices of these two products would come down, which is currently in the region of Rs 28,000-30,000 per tonne. The reduction of prices of these two products would benefit the real estate sector, where steel is a significant cost component.
RK Sharma, secretary-general, Federation of Indian Mineral Industries, the apex association of iron ore producers, while welcoming the government?s move said that the government should remove the 15% export tax on lumps for producers in the Goa and Bellary and Hospet region in Karnataka. Apart from these sectors, iron ore lumps are exported by the state-owned NMDC. Sharma said iron ore lumps produced in the region has no domestic demand because of its composition so it makes no sense to levy the duty on them.
Both the steel and iron ore sector are currently witnessing decline in prices due to lack of demand from the consuming sectors.