Govt proposes to cut import duties on steel to aid MSMEs
The government has proposed disbanding import taxes on steel to aid MSMEs, which has been hit hard by the surge in cost of raw materials amid the second wave of Covid-19, bringing it to zero or net zero levels.
The decision had been looked upon to re-examine duties on steel products and veto the taxes or reduce them to help the industries as prices of materials skyrocketed in the midst of the pandemic.
These changes could also bring back the steel companies that deviated from steel production to oxygen plants when hit by crisis during the Covid-19 pandemic and restore the supply lines.
Finance Minister Nirmala Sitharaman had remitted anti-dumping duty (ADD) and countervailing duty (CVD) on certain steel products and reduced customs duty on -- semis, flat, some products of non-alloy, alloy, and stainless steels from 10-12.5% to 7.5% while cutting down taxes on steel scrap for the fiscal year 2021-22.
The custom cuts will be officialised soon by the Directorate General of Foreign Trade (DGFT). Overlooking iron-ore supply constraints and rise in high global prices, the domestic hot-rolled coil (HRC) had surged from Rs 39,200 per tonne in March 2020 to Rs 56,000 per tonne in February and then to Rs 58,000 in April.
Further increase in Indian steel prices is expected with steel industries in demand and China cutting export incentives to support steelmakers.
The steelmakers are concerned that a cut in import duty could risk the quality of steel flooding our markets with cheap and low-quality steel.
They stated that the proposed decision of the government may become effective after a long period but could come across the same issue again.
Investment Information and Credit Rating Agency (ICRA) mentioned a report that Indian steel mills would unload steel in large quantities to export markets and would be profitable amidst the reduction in demand due to the second wave of Covid-19 pandemic and lockdowns.
However, duty cuts would limit margins and bring a lot of export destined products back into the domestic market.