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Govt ready for another cut in import duty on steel to tame prices
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SME Times News Bureau | 12 May, 2021
The government has proposed to slash import duties on steel items
further bringing it to zero or near zero levels to provide relief to
MSMEs, which have been hit hard by the high cost of raw materials amidst
the raging pandemic.
Top government sources said that a decision
had been taken to review duties on steel products and reduce it or
withdraw it completely on few items to help the user industry hit hard
by rising price of the metal in the domestic market.
Also, lower
import duties would help maintain supply lines that have been affected
with several domestic steel companies reducing steel production to
divert medical grade oxygen for Covid-19 relief measures.
In
budget 2021-22, Finance Minister Nirmala Sitharaman had revoked the
anti-dumping duty (ADD) and countervailing duty (CVD) on certain steel
products while reducing customs duty uniformly to 7.5 per cent on
semis, flat, and long products of non-alloy, alloy, and stainless steels
from 10-12.5 per cent levels earlier. She also brought down import duty
to nil on steel scrap to support user industries hit hard by sharp rise
in steel prices.
These duties may now be withdrawn or slashed further.
"Steel
prices continue to remain firm and have also risen further in recent
months. It is making operation of several user industries difficult
specially in a market disrupted by the pandemic. Cut in import duty will
help tame steel prices as the global prices of steel in certain markets
are still lower than domestic prices. The measure will also help supply
lines of steel if there is any shortage in domestic steel production
due to use of another input oxygen by steel makers for Covid relief,"
said the official source quoted earlier.
It is expected that duty
cuts in steel will be announced shortly by the DGFT after getting
formal nod from the finance ministry. A call has to be taken whether to
bring down duty levels largely at 7.5 per cent to 2.5 per cent or
withdraw it completely for the time being.
Domestic hot-rolled
coil (HRC) prices rallied to a multi-year high of Rs 56,000 per tonne in
February from Rs 39,200 per tonne in March 2020 as demand improved amid
iron-ore supply constraints and high global prices. This has further
improved to over Rs 58,000 in April, a jump of over 50 per cent in last
13 months.
With demand for steel remaining firm and China cutting
export incentives to steel makers to support domestic needs, Indian
steel prices are expected to move up further. The cut in duty is
expected to tame prices in the domestic market while providing
competition to domestic steelmakers from traders who secure cheaper
metal from abroad.
Steel producers asking anonymity said that the
move to cut import duty would be detrimental to the interest of
domestic steelmakers as it could flood the market with cheap and
substandard steel being dumped into the country. They said that the
steel market is giving indications that domestic steel sector may turn
profitable after a long interval. But duty cuts could change the cycle
again.
In the current scenario of a moderation in demand in India
due to the second wave of Covid-19 and consequent business lockdowns,
Indian steel mills would be able to offload large steel volumes to
export markets and still remain highly profitable, according to a recent
report from ICRA.
But a cut in duty would squeeze margins and bring a lot of export destined products back into the domestic market.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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