Budget expectations 2021: Steel
The Indian stainless steel industry has urged the government to slash the existing import duties on key raw materials in the upcoming Union Budget 2021-22. In its recommendations to the Ministry of Finance, Indian Stainless Steel Development Association (ISSDA), the apex body representing the domestic industry, has appealed to exempt the 2.5% Basic Customs Duty (BCD) levied while importing key raw materials, including ferro-nickel and stainless steel scrap. Currently, neither of these raw materials is available in the country, necessitating their import.
ISSDA has also sought abolition of the existing 7.5% import duty on graphite electrodes, a critical component in stainless steel manufacturing, as they constitute a major share of input cost. Additionally, ISSDA has sought an increase in the import duty on stainless steel flat products to 12.5%, to bring it at par with carbon steel products, in order to check undue imports. ISSDA asserted that these measures, if undertaken, will not only boost domestic manufacturing but also curb undesired stainless steel imports, thus spurring the ‘Make in India’ movement.
The government has set in motion a wave of reforms to boost economic growth and the Indian stainless steel industry is ready to contribute to the ‘Atmanirbhar Bharat’ vision. This is the optimum time for the government to stop considering essential raw materials as source of revenue and provide stimulus to domestic manufacturing by exempting duties on importing critical raw materials. This step will improve the competitiveness of the domestic industry and in turn, provide impetus to the hard hit MSME segment, which has a 40% share in the domestic stainless steel industry. Additionally, undue imports have harmed the domestic industry which is operating at 60% of its capacity and is financially stressed after COVID-19 related disruptions. We request the government to rationalise the duty structure in order to catalyse the revival of this sector that has immense potential to generate additional jobs.
India continues to be the second largest producer and consumer of stainless steel in the world. High input costs, coupled with imports from FTA countries, have eroded the global competitiveness of Indian companies. Undeterred by trade challenges, the Indian stainless steel industry has consistently demonstrated 8- 9% growth in the past few years, as compared to about 5% exhibited globally.
This growth was made possible due to capacity building and modernisation initiatives undertaken over the last 15 years, along with aggressive market development efforts by the industry. The demand for stainless steel in India is growing at a compound annual growth rate (CAGR) of ~8-9% across a spectrum of applications. Moreover, a lower per capita consumption of stainless steel at ~2.5 kg against the world average of 6 kg highlights an immense untapped potential for stainless steel usage in India. Stainless steel provides sustainable solutions with lower lifecycle costs across diverse applications, such as public transport, buildings and construction, process industries, and food processing etc.
Author: KK Pahuja is President, Indian Stainless Steel DevelopmentAssociation (ISSDA).