The Hindu Business Line : Duty cut on coking coal imports likely

A section of the steel producers, particularly SAIL, has appealed for a waiver of the customs duty but the Government is only considering a marginal reduction and a decision is expected shortly after which it will be sent to the Ministry of Commerce.

NEW DELHI, April 18

IN a bid to help the domestic primary steel manufacturers bring down production cost, the Government is studying the implications of bringing down the import duty on coking coal used in the blast furnaces for steel making.

The Ministry of Steel is scrutinising the nitti-gritties of a proposed cut in customs duty of coking coal. A section of the steel producers, particularly SAIL, has appealed for a waiver of the customs duty but the Government is only considering a marginal reduction and a decision is expected shortly after which it will be sent to the Ministry of Commerce.

One of the interesting aspects of the proposed duty cut on coking coal import is that it will be of no use to the new generation steel companies who do not use coal as an input such as the Jindal Vijaynagar Steel which uses the Corex technology and Essar Steel which uses the electric arc furnace route. These companies will be in a disadvantageous position vis a vis other producers because there will be no corresponding cut in their input cost.

Government sources told Business Line that a consensus within the industry will help the Ministry formulate its recommendations but the "industry appears to be divided".

According to a section of the industry, the reduction in coking coal duties for steel manufacturers is primarily to help the Government-owned SAIL, at the cost of the exchequer. "It is nothing but a case of subsidised input for SAIL and other companies such as Tata Steel and RINL will also be benefited but the others will not get any benefit out of it."

Currently, India imports around 10 million tonnes of low ash content coking coal annually, mostly used by steel manufacturers, as this quality of coal is not available domestically.

During the past one year the international price of coking coal has increased from $37 per tonne to $45 per tonne creating heavy pressure on the two largest domestic steel producers, namely SAIL and Tata Steel and RINL.

The present customs duty on coal is five per cent, which finally works out to around 9.29 per cent along with surcharges. The existing duty works out to around Rs 280 per tonne. SAIL alone pays around Rs 180 crore as customs duty for coal.

SAIL sources said that such a duty reduction would help it fight out in the market where despite higher take-offs sales realisations are low. "Lower costs will inevitably help us improve our cash situation," SAIL officials said.

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