By Sahitya Kumar Shee
Expectations from Union Budget:
| Key expectations of Industry | Current rate | Expected |
| Non Ferrous | ||
| Increase in basic custom duty on Aluminium and Aluminium products | Aluminium-7.5% Aluminium products – 10% | 15% |
| Increase in export duty on Bauxite | 15% | 20% |
| Increase in basic custom duty on copper products | 5% | 7.50% |
| Exemption of basic custom duty on copper concentrate | 2.50% | Nil |
| Ferrous | ||
| Reduction in export duty of low grade iron ore | 10% | Nil |
| Increase in import duty on Stainless steel | 7.50% | 15% |
| Reduction in duties on stainless steel scrap | 2.50% | Nil |
| Reduction of basic customs duty on metallurgical coke | 5% | Nil |
The steel industry has been reeling under immense stress from import glut and predatory pricing for the last couple of years. Due to the excessive surge in imports of stainless steel products, the industry has been struggling and was expecting an increase in basic customs duty on finished goods from 7.5 per cent to 15 per cent. Also, measures to protect domestic aluminum players were expected which are troubled with cheap imports.
Announcement in Budget
- The basic custom duty on nickel has come down to nil from 2.5 per cent earlier.
- Basic customs duty on MgO coated cold rolled steel coils for use in the manufacture of CRGO steel has been reduced from 10 per cent to 5 per cent.
- The government reduced the BCD on Hot Rolled Coils when imported for use in the manufacture of welded tubes and pipes from 12.5 per cent to 10 per cent.
- Export duty on ‘Other aluminum ores, including laterite’ has been revised from nil to 15%.
- Allocation of Rs 3.96 Lakh Crore to Infrastructure Sector. This will aid to growth for Steel sector in future years.
Impact on the sector: Neutral
- Bringing down the basic customs duty (BCD) on nickel (a key steel-making raw material) to zero from 2.5 per cent comes as a great relief for the stainless steel industry which has been facing challenging times. This reduction of BCD on nickel will be mildly positive for the domestic industry.
- The reduction of BCD on CRGO steel will help in reduction of the cost of power transformers.
- The reduction of BCD on Hot Rolled Coils for captive use in welded tubes and pipes would create price pressure on domestic HR coil producer.
- Focus on infrastructure is a big positive for steel companies and the industry because it is a key driver of steel consumption.
Proposal & Impact
| Budget Proposal | Impact on the industry |
| Decline in the customs duty of HR coils used for manufacturing of welded tubes & pipes | This is likely to marginally increase the imports of specific categories of HR coils. A very few select manufacturers who produce these coils may face increase competition from imports. |
| Decline in the custom duty on nickel | As nickel (required for stainless steel production) is mainly imported, it is expected that the raw material cost is likely to get reduced. This is likely to benefit the highly cost competitive stainless steel manufacturing industry, which faces significant imports threat. |
| Export duty on ‘Other aluminium ores, including laterite’ has been revised from nil to 15%. | Marginally Positive for the Aluminium Producers |
Proposed Changes in Duties:
| Duty Structure Changes | ||
| Export Duty (%) | Before | After |
| Aluminium Ore | 0% | 15% |
| Custom Duty (%) | ||
| Nickel | 3% | 0% |
| Hot Rolled Coils | 12.50% | 10% |
| MgO coated cold rolled steel coils | 10% | 5% |
Impact on Companies:
| Company | Impact | Comment |
| Tata Steel, SAIL, Jindal Stainless Steels, JSW Steel Ltd., Usha Martin Limited | Neutral | While reduction in the custom duty on nickel is a positive for the stainless steel producers, overall the impact on the steel industry remains neutral. |
| Hindalco Industries Limited, Vedanta Limited, National Aluminum Company Limited | Positive | The rise in the export duty would ensure its domestic availability for higher aluminum production. |
Conclusion: The plight of the stainless steel industry has been ignored in the Budget; despite an increase in import of stainless steel products, the basic customs Duty on finished products has been not hiked. Abolishing the duty on key raw materials and increase duty on stainless steel finished goods would have helped to revive the industry. Nonetheless, a huge investment in infrastructure will help steel sector in coming years.
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