The finance ministry may not immediately review export duties imposed recently on a host of steel and iron products to calm down prices of critical inputs for infrastructure projects.
“We have not yet received any proposal from the ministry of steel to review the duties,” a finance ministry official told FE.
On May 21, the government reduced import duty on certain raw materials for steel and imposed export duties on certain steel and iron products.
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%.
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Some steel makers have expressed concern that while domestic demand has remained muted in recent months, companies are losing out on overseas customers due to the export taxes.
According to SteelMint, Indian steel exports dropped a steep 53% in the first half of FY23 to 5 million tonnes (mnt) against almost 11 mnt seen in the same period in H1FY22.
Flat steel exports declined a substantial 44% to 3.66 mnt (6.53 mnt) y-o-y, semis plunged 66% to 1 mnt (3 mnt) and longs by a whopping 69% to 0.43 mnt (1.40 mnt) in the period under review, it said.
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 was cut to zero and that on methyloxirane (propylene oxide), an input for plastics, was reduced to just 2.5%.
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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 8.39% in September 2022 from 8.73% in August and 19.03% in April.