The Centre may not immediately review export duties on a host of steel and iron products, as users of the alloy, including public sector infrastructure projects, are citing rise in input costs.
On May 21, the government has reduced import duty on certain raw materials for steel and imposed export duty on certain steel and iron products.
“Nothing under consideration as of now. However, the whole package will be reviewed at some point in time,” a senior official told FE.
To rein in input prices and control runaway inflation, the Centre imposed an export duty of 15% on select pig iron, flat-rolled products of iron or non-alloyed steel, bars and rods and various flat-rolled products of stainless steel and another 45% on iron ore pellet. Similarly, the export duty on iron ores and concentrates was raised to 50% from 30%.
Some steel makers have expressed concern that while domestic demand has remained muted in recent months, companies are losing out overseas customers due to the export taxes.
Responding to the imposts, the average monthly price of hot-rolled coil (HRC) – a benchmark for flat steel – eased in July to Rs 59,800 per tonne from Rs 76,000 in April.
Steel exports, meanwhile, crashed to just 0.63 million tonne in June from 1.38 million tonne in May and 1.47 million tonne in April.
Iron ore exports declined by over 91%, month-on-month, in June from around 1.64 million tonnes (mnt) in May, while pellets exports fell sharply by 92% on the month from 1.05 mnt in the preceding month, according to SteelMint.
According to an Icra report, the 15% duty covers products that accounted for 95% of the country’s finished steel exports in the last two fiscals and would render exports significantly less attractive going forward.
This, in turn, could exert pressure on domestic steel prices and industry capacity utilisation levels.
On May 21, the government also cut import duty on a host of raw materials for the steel industry. It scrapped the 5% import duty on coke and semi-coke and 2.5% basic customs duty on PCI coal and coking coal. Customs duty on naptha was also reduced to 1% from 2.5%. The duty on ferro-nickel cut to zero and that on methyloxirane (propylene oxide), an input for plastics, reduced to just 2.5%.
Elevated prices of critical inputs such as steel and cement have threatened to inflate the costs of the government’s own projects in the housing, roads and railways sectors, apart from weighing on private investments in infrastructure. The government has already budgeted a record capex of Rs 7.5 trillion for FY23, betting big on its multiplier effect to spur economic growth. Moreover, high prices of steel and cement have long been a sore point with consuming industries, especially engineering goods manufacturers and realty developers, among others.
Wholesale price inflation in semi-finished steel further eased to 10.73% in June from 14.62% in May and 18.41% in April.