Steel industry’s mixed reaction

For the Indian steel industry, the Budget for 2013-14 brought mixed reactions. In fact, the industry was hurt more as the Finance Minister, Mr. P. Chidambaram, did not accept major demands of the industry like imposing duty on steel imports or removal of duty on iron ore.

The Minister announced full exemption from export duty to galvanized steel sheets falling under certain sub-headings, retrospectively from March 1, 2011. This will help steel makers like Steel Authority of India (SAIL) and Tata Steel particularly as they are the major producers of galvanized steel sheets, which are coated with zinc metal and are used in roofing, panelling and automobile bodies, among others.

Commenting on the development, Tata Steel Managing Director H.M. Nerurkar said: “We welcome the extension of full exemption from export duty for galvanised steel sheets. This will help the steel industry greatly and enable us to be more competitive in the international market.”

According to industry officials, Indian steel makers produce around four million tonnes of galvanised steel in a year, but could not make much headway in international markets as it was uncompetitive for them due to the prevailing duty.

The Finance Minister also announced reduction in basic customs duty to five per cent from the existing 10 per cent on stainless steel wire cloth stripe and to five per cent from the existing 7.5 per cent on wash coat.

“We cheer the thrust given to the infrastructure industry through investment allowance of 15 per cent and various steps for mobilising funds for the growth of the industry,” said Mr. Nerurkar. SAIL also echoed a similar sentiment. “The Budget proposes capital allowance of 15 per cent on investment in plant and machinery of more than Rs. 100 crores till March ’15, which will attract new investments and facilitate implementation of projects. As many of our projects are likely to be capitalized shortly, this would be beneficial to SAIL,” the company Chairman, Mr. C.S. Verma, said.

Initiatives taken on the infrastructure front will increase the overall steel demand, which has moderated in recent times, he added.

The domestic steel industry is however disappointed that its major demands like imposing duty on steel imports and removing export duty on iron ore imports were not met. While rising imports of steel is hurting the margins of domestic players, it is also facing iron ore shortages due to the mining ban in States like Karnataka and Goa. In fact, some of the companies have gone for imports as well in recent times.

The larger disappointment is on the ground that there are no major steps to boost steel production or its consumption in the Budget, though the industry is going through a bad phase and growth in steel production has come down to 3.1 per cent during April 2012, to January 2013 from the level of 10.9 per cent during the same period of 2011-12.

“We are disappointed that the steel industry demands to reduce import duty on iron ore and other raw materials for steel were not met,” Tata Steel’s Nerurkar said.

Said to the Essar Steel CEO and Managing Director, Mr. Dilip Oommen: “The Budget proposals have nothing much to cheer about. While a whole lot of measures have been earmarked for infrastructure, which is the only few positives from the budget, and so likely to revive the flagging fortunes of core industries to some extent like steel, it remains to be seen how much of it is actually implemented.”

The JSW Steel Joint Managing Director, Mr. Seshagiri Rao, said there were no efforts to fast-track stalled projects in the Budget. “As most of the projects are stalled due to regulatory and bureaucratic delays, the expectations from the Budget to ease the process of clearances is not met since the effectiveness of the Cabinet Committee on Investment is yet to be established.”

In fact, the sponge iron producers said that their demands were ignored completely in the Budget, though they have sizeable share of the long steel production in India.

– PTI Economic Service