According to sources in the government, the package has to be put in place before the March 6 deadline set by the United States for streamlining the steel sector tariff structure. The measures, which were finalised at a recent meeting between the representatives of the steel ministry and officials of the finance ministry are likely to be announced in the annual Budget next week. The government also proposes to announce a National Steel Policy after rationalising the tariffs.
The sources said that custom duty rates would be phased down from 35 to 20 per cent over a period of three years. The floor price for seconds and defective steel is likely to be fixed at par with the prime grade hot rolled coil imports at $302 per tonne.
The suggestion to reduce excise duty from 16 to 8 per cent came from a high-level panel comprising representatives from steel companies, financial institutions, steel and finance ministers.
These initiatives form part of the government agenda to bring down tariff and non-tariff barriers as 10 years was sufficient time for the industry to rise to the challenge created due to excess capacity as well as restrictions in exports to US and Canada by moving away from the era of protectionism, minister for steel BK Tripathy said. The minister, however, refused to divulge details of the proposal.
The move will also encourage the domestic industry improve the product mix. Also, the production of value-added steel will be enhanced.
Commenting on the move of lowering the customs duty resulting in increased imports, which in turn likely to affect the already-strained domestic steel industry, Mr Tripathy said, This is the only mantra that would help domestic industry bring in efficiency, it should perform so that people get better deal as in the rest of the world.
Much would also depend on the behaviour of the rupee which would also have its impact. If its depreciation matches the reduced tariff, there would be no major impact, he said.
According to a top official in the steel ministry, the move to reduce customs duty on steel will help increase the quantum of imports from US but the government is under tremendous pressure from the US administration, which has fixed March 6 deadline for final imposition of tariffs over and above existing anti-dumping duties on Indian steel exports and wanted the Indian government to lower the customs duty, after which it would reciprocate while levying tariff under US Trade Act. To counter the excessive imports in the wake of duty cut, anti-dumping mechanism would be strengthened as is the case of Russia and Ukranian steel products, the minister added.