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Some Cheer For Steel Industry in Lacklustre Budget

Domestic steel producers got a few sops, but experts says they are not enough

Published: Mar 16, 2012 03:38:08 PM IST
Updated: Mar 16, 2012 08:04:04 PM IST

The Indian steel industry, plagued by increasing raw material costs, waning demand and delays in setting up new plants, got a “minor relief” after Finance Minister Pranab Mukherjee made imported flat steel more expensive.

In the Union Budget presented on Friday, Mukherjee increased the custom duty on non-alloy flat steel from 5 percent to 7.5 percent. “This will increase the prices of imported flat steel by up to Rs 1,000 per ton,” said an executive from one of the biggest producers of flat steel in India. 

Flat steel are mostly used by the automobile sector. Bloomberg reported that steel imports to India, mainly of flat steel, rose 3.2 percent to 6.2 million tons in the 11 months to February after a 10 percent decline in the same period last year. 

The increase in duty will benefit Indian steelmakers including Tata Steel, Essar Steel and JSW Steel, who are the major producers of this steel in the country.

 The Sajjan Jindal-led JSW Steel had another reason to cheer, with Mukherjee reducing custom duty on coating material used to manufacture electrical steel from 7.5 percent to 5 percent. The company had recently announced plans to set up a plant to produce electric steel, which is used in the power sector.

Among other proposals, the 2012 Union Budget also reduced import duty on nickel ore and concentrate that are used in making specialised steel. "increase in customs duty for flat carbon steel and reduction in import duty for equipment required in mining & minerals sector are all measures which are positive for steel industry," says CS Verma, Chairman and Managing Director, SAIL, the steel major that also has captive iron ore mines.

In a move to increase the use of low-grade iron ore that is available in plenty in India, Mukherjee also reduced duty on plant and machinery imported for “setting up or substantial expansion of iron ore pellet plants or iron ore beneficiation plants from 7.5 percent to 2.5 percent.” Pellets are made from low-grade iron ore. Beneficiation refines this lower grade ore. “In a 12 million-ton-per-year pellet plant that can cost up to Rs 4,200 crore, this reduction can help save up to Rs 100 crore,” said an official from a private steel company that operates pellet plants in the country.

 While the steel industry gets these “minor reliefs,” the mining industry on the other hand is not very amused by the finance minister’s move to reduce duty on machinery that is used in surveying and prospecting for any mine. “What is the use of this measure when there are inordinate delays in getting licence to mine? Unless we get mines, how can we survey or prospect them?” asks RK Sharma, secretary general of Federation of Indian Mineral Industries. In fact, adds mining consultant Pradeep Maheshwari, "We were hoping for a larger policy measure from the government for the mining industry, where private miners are still reluctant to invest."

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