Scrapping of export duty on chrome ‘to hit industry’

The Centre’s decision to abolish 30 per cent export duty on chrome ore is a setback for domestic ferrochrome producers and stainless steel companies.

India Inc fears that much of the high-grade chrome ore will be exported to countries like China, which in turn will choke domestic supplies and push up prices of steel.

Domestic players, who have invested ₹5,000 crore for ramping up ferrochrome capacity to about 1.75 million tonne per annum, will be in a fix if a significant amount of ore is allowed to be exported.

Speaking to Bloomberg TV India, R Ganesh, Director (Sourcing) of Jindal Stainless Ltd, says the decision will benefit China and hurt the domestic industry. The demand for stainless steel, which by and large matches the GDP growth, should rise by 8-9 per cent in FY17, he said. Excerpts:

What will be the impact on the domestic industry due to abolition of the 30 per cent export duty?

If you go back to the earlier days, all exports were through MMTC. The Centre had way back in 2007 imposed ₹2,000 duty on chrome ore and concentrate exports per tonne, which got increased to ₹3,000 per tonne in 2008.

In 2012, this ₹3,000 got changed to 30 per cent ad valorem. That was the time when all chrome manufacturers were coming up with investments. Incidentally, chrome ore is one of the most important raw materials for steel.

India has got only 1 per cent of world chrome ore deposits. And the entire 1 per cent is available only in Odisha.

Because the government had taken some pro-active steps earlier, a lot of ferrochrome manufacturers had come up with projects with investment amounting to almost ₹5,000 crore, with the capacity of 1.75 million tonne.

Even today, if you see the total capacity of ferrochrome, it is about a million tonnes. Of this, about half gets exported. The problem is, even though the ferrochrome capacity has been enhanced, chrome ore is either not available, or not available at the right price.

In fact, there is only one company in India, the Orissa Mining Corporation (OMC), who has got its own mines, apart from some manufacturers.

OMC supplies chrome ore to all ferrochrome manufacturers. They have a particular basis of arriving at the price offered at the auction – the base price. This is basically coming from the export of the chrome concentrate.

With the removal of export duty, there will been an increase of price by almost ₹3,000 per tonne, in case OMC sticks to the old method of calculation.

On one hand, you don’t have chrome ores for manufacture of ferrochrome and on the other hand, the Centre, instead of supporting the ferrochrome manufacturers, has removed the duty.

That is why all of us are concerned as to how things will pan out in the future.

From Jindal Stainless’ point of view, what is the hit that you are going to take due to the scrapping of export duty?

For the manufacturing of ferrochrome, chrome ore is required.

So what will happen is a time will come when the chrome ore will start getting exported to China.

Now, South Africa is exporting chrome ore to China and the ore that they are exporting is low grade. And in case we start exporting our high grade chrome ore, China will benefitting at our cost.

The cost of manufacturing of ferrochrome will increase because of availability and price. And this will definitely hit the steel industry.

What is the demand picture looking like for stainless steel? What are the projections going into the new fiscal year?

In case of stainless steel, by and large the demand goes in line with the GDP growth.

But I guess there should be 8-9 per cent growth year-on-year.

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