Steel companies seek customs tweak on input items

The two major expectations of the domestic steel sector from this year’s Budget, to be presented on July 6, are correction in the inverted duty structure and a boost to local steel demand though an announcement  of massive public investment in infrastructure.

Steel manufacturers’ believe easing of lending norms and other such measures by the government will facilitate kick-off of private capital expenditure (capex), which has remained low over the last few years.  

R K Goyal, vice president of Karnataka Iron and Steel Manufacturers Association (Kisma) and managing director of Kalyani Steel, told DNA Money the government needed to seriously look into flawed duty structure of the metal.

He said while the duty on finished steel products from Korea, Japan and other countries with which India had Free Trade Agreement (FTA) is currently zero rated, there was customs levy on raw materials imported into the country for steel production.

This was eroding the competitiveness of Indian steel.  

“There is zero duty on finished products coming from Korea, Japan and other countries with whom we have FTA but on the all raw materials we (steel makers) are paying import duty. Our first expectation is this should be corrected. We also expect a fairly large investment in infrastructure so that the capex cycle kicks off. We also want lending norms to be eased otherwise no capex will come from the private sector as the plants of a lot of entrepreneurs, who have the risk appetite, have been locked,” said the chief of the regional steel sector lobby body.  

The government is looking to invest around Rs 100 lakh crore over the last five years for creating infrastructure in the country. This would translate into Rs 20 lakh crore each year, which is a huge jump from the Rs 5.97-lakh-crore spend announced in the last Budget.  

A spokesperson of Tata Steel said the proposed infrastructure investment would have cascading impact effect on several sectors of the economy and would “therefore be a welcome steps”.  

“We look forward to measures which would reduce the cost of doing business. While the government has done a lot of work to improve the ease-of-doing-business, it is perhaps desired that the cost-of-doing-business is addressed as well. This will improve the profitability of the companies and hopefully trigger private sector investments,” he said.   

According to him, availability of funds will be critical for the ecosystem to seize the growth opportunities.

“We expect further measures to be taken to improve the liquidity in the system.  As rural economy is a big driver of demand, we need to accelerate the pace of economic activities in rural India. We look forward to actions, which would stimulate economic activity in urban, rural and across sectors. This shall help us pursue the growth ambitions, we as a nation have”, he averred.

A senior executive with the Jindal Steel Ltd (JSL), who did not want to be named, said the sector was also expecting the current 2.5% duty on ferro nickel and stainless steel scrap to be completely done away with.

He was expecting the government to mandate use of indigenously-made steel for state infrastructure projects to push demand.  

According to him, the government is likely is take a protectionist stance in its Budget to nurture the growth of domestic steel industry. He, however, felt that can be done outside the Budget too.  

Last year, the US government hiked tariffs on domestic steel (25%) and aluminium (10%) to reduce its trade deficit with India.