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  • Steel and Other Ferrous Products: Custom Duties on Pet Coke, Anthracite Coal and Met Coke should be restored

    Steel Industry has been a core sector which tracks the overall economic growth in long term. The steel demand is mainly derived from the sectors like automobile, infrastructure, consumer durables etc. Since last one year the steel industry players is experiencing lot of challenges mainly due to increase in prices of raw material and slowdown in demand. Hence the steel industry players are requesting for slashing import duties on important ingredients such as pet coke, coking coal, anthracite coal and met coke. Slashing import duties on these products will help the industry to achieve coast competitiveness. Non-availability of these raw materials is affecting the growth of domestics steel industry.

    Federation of Indian Mineral Industries (Fimi), in its pre-budget submission have requested to reduce import duties on low ash metallurgical coal to 2.5% from 10% to provide incentives to the domestic steel industry. The cost of production of pet coke should also be lowered as it is cheaper substitute of met coke and should be encouraged in the domestic industry to help save precious foreign exchange and make domestic steel mills more competitive. Fimi also requested for zero duty on coking coal as it is a vital raw material used in the manufacture of steel and predominantly used for making coke for use in steel making and thus forms a major part of the final price of the steel. Levy of 2.5% on coking coal has affected the costing of the steel. They are also requesting the government to scrap the 30% export tax on iron ore and 15% on bauxite in the upcoming budget.

    Federations of Indian Chambers of Commerce & Industry (Ficci), in its pre-budget analysis have also raised concern on similar issues. According to Ficci, Pet coke (2% Sulphur) is gaining importance as one of the important carbon bearing inserts used by Steel Industry, part replacing costly and scarce coking coal and adding carbon value to the end product i.e., metallurgical coke by increasing the carbon content and yield of coke in turn reducing imports of costly metallurgical coke. Pet coke (2% Sulphur grade) is a relatively cheaper substitute of Met Coke and should therefore be encouraged in domestic industry to help save precious foreign exchange and make domestic steel mills more competitive by lowering their cost of production. Hence, it is recommended that duties on Petcoke import can be restored back to its original level of 2.5 % as it will help refinery to reduce their utilities cost.

    Anthracite Coal, Coking coal, Coke, Pet Coke, Limestone, Dolomite are vital Inputs for the steel Industry. The availability of these items in good quality is declining in the country and the Industry has to depend on their imports on regular basis. The basic Customs Import Duty on Anthracite Coal is 2.5%. Since Ferro Alloy Industry plays a vital role in the manufacturing of steel, it is necessary to make available these reductants at international competitive price to make Indian steel mills more competitive. It is therefore recommended that Customs duty on Anthracite Coal (CTH 27011100) be reduced from 2.5% to NIL.

    Met Coke, is one of the vital inputs for the Steel Industry. It has always been attracting the lower and concessional rate of customs duty. However, the basic customs duty has been enhanced from 2.5% to 5% w.e.f. 01.03.2015. Additionally, anti-dumping duty has also been imposed on its imports with effect from 25.11.2016. As a result, the cost of this vital input in Steel manufacturing has gone up necessitating the increase in the price of steel which is acting as deterrence to the competitiveness of domestic products in international markets vis-à-vis similar products of other countries like China. It is, therefore suggested that the Basic Customs duty on Metallurgical Coke be reduced from 5% to NIL.

    In the budget of 2014-15 the exemption available to Coking coal was removed by the Government by making it at par with other coals and thus imposed 2.5% of Basic Customs Duty on coking coal. This amendment has adversely affected the steel manufacturers in India and ‘Make in India' drive. It is requested to restore the exemption of NIL rate of duty allowed earlier to Coking coal without any technical definition of coking coal.

    Increase in steel production in the country, has led to rising demand for SMS and BF grade limestone. Therefore, the limestone imports have been increasing consistently, as the reserves of SMS and BF grade limestone within the country are scattered and there is a capacity limitation of the existing limestone mines in various states. So, it is requested to reduce the Customs Duty on all grades of limestone (CTH 2521) and dolomite (CTH 2518) from 2.5% to NIL in line with similar imports from ASEAN countries, without any technical condition.

    The requirements for Ferro Nickel – a key Stainless steel raw material, are met completely through imports as Nickel sufficiently is not available within the country. Stainless Steel Scrap too is not available indigenously in sufficient quantities and almost 75% of the stainless steel scrap requirement in the country has to be met through imports. Therefore, import duty on Ferrous and Stainless Steel Scrap should be reduced from the existing rate of 2.5% to 'NIL'.

    Almost 60% of domestic production of Graphite Electrode is exported creating shortage in the domestic market. In turn, Indian Steel Producers have to resort to imports of Graphite Electrodes. Such high duty merely increases the cost burden. Hence, it is recommended that, BCD on Graphite Electrodes should be reduced from existing rate of 7.5% to 'NIL'; while it is recommended to impose 30% export duty on Graphite Electrodes to increase its domestic availability.

    Stainless steel scrap is the most important raw material required by the stainless steel industry as it is the most cost efficient way of meeting the nickel requirements. Currently it attracts 2.5% BCD. It is recommended to reduce basic custom duty on stainless steel scrap from 2.5% to zero.

    Outlook

    The year 2019 was tough for domestic steel industry. The steel consumption fell to unexpected levels due to liquidity crunch in domestic market and US-China trade war on global front. The hot-rolled-coil prices have dropped to the lowest level of Rs 33,000 per tonne from the high of around Rs 44,000 per tonne in the year. Large players had to cut production to align them with the market consumption pattern. But leaving the worst behind, the steel industry players are looking forward for better price scenario and increase in consumption mainly in the infrastructure and construction segments. The domestic industry players are hopeful that the Budget will bring some relief to the steel sector. The key to revive flat steel production in the market would be to improve liquidity for the auto sector.

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