Steel sector fears stimulus rollback in iron&steel

The steel sector fears that Union finance minister Pranab Mukherjee may increase the excise duty on pig iron and steel from 8% to 16% as a measure to ease pressure on the revenue deficit, which was 4.4% in 2008-09 against an estimated 1%.

Ravi Shegal, chairman of the national committee of the Institute of Indian Foundrymen, told Fe that the finance ministry has given a strong impression that the stimulus package given to the iron and steel sector would be rolled back and that it will have to go back to a 16% excise duty regime.

The government, as a stimulus to the iron and steel industry, after the global economic meltdown, had cut down the excise duty on pig iron and steel to 8%.

? The Institute of Indian Foundrymen has requested Pranab Mukherjee not to touch the excise duty on pig iron and steel as the industry is not yet out of recession,? Shegal said.

?Though steel demand situation in India has come across some rectification, there is still room left for improvement. A sudden withdrawal of stimulus will mess up the recovery, which is taking place at the moment,? Lalit Beriwala, a director in Shyam Steel, said.

According to Pawan Poddar, president of the Bharat Chamber of Commerce, it is unlikely that the excise duty would go up to 16% at one go. The government is likely to make a partial rollback of the stimulus given to the steel sector and fix a rate, which would be equitable with the Goods & Service Tax.

?The finance minister would have GST in mind, so he would not fix any such rate which will have to be reduced before subsuming excise with GST,? Poddar said.

?The excise duty on sponge iron and steel is expected to go up to a maximum of 12% from the present 8% and even this increase will not go down well with the sector, which is on a recovery mode,? Bipin Vohra, managing director, SPS steel, said.

However, Visa Steel chairman V Saran said he was not in favour of any speculation and would rather wait for the budget announcement. Since there is little hope that the GST would roll out in the near future, McNally Bharat Engineering managing director Srinivas Singh said the government could do considerable adjustments in excise duty.

He said excise duty paid for construction material of civil & structural construction work should be CENVAT-able to reduce project costs.

At present 50% of the excise duty paid on machinery used in manufacture is adjusted against CENVAT paid but in case of plants installed, CENVAT cannot be adjusted against the excise duty paid.

?This anomaly needs to be corrected, since a plant operator is like a manufacturer,” Singh added.

He said for interstate movement of construction equipment & materials to other construction sites, waybill, which has to be taken in many states, should be abolished. Works contract tax of 2% should be cut to zero to bring down the cost of executing infra projects, necessary for the projected 7.5% GDP growth.