New Delhi, August 7
The Finance Ministry has said it will consider reviewing export levies on steel once it gets a formal proposal from the Steel Ministry. “We are awaiting formal communication, then will take a call,” a senior Finance Ministry official told BusinessLine.
Meanwhile, officials from the Steel Ministry said they have received several representations from industry bodies on the adverse impact of duty on exports. “There have been some talks with the Finance Ministry, but nothing concrete has materialised yet. At some point, definitely the whole duty structure and package would have to be reviewed,” a Steel Ministry official said.
On May 21, the government made modifications in tariffs on raw materials of steel and other steel products wherein import duty on anthracite/pulverised coal injection (PCI), coke and semicoke and ferro-nickel reduced to zero. At the same time, export duty on iron ores/concentrates and iron ore pellets were raised to 50 per cent and 45 per cent, respectively. Also, a 15 per cent export duty was imposed on pig iron.
The Steel Ministry is reportedly reviewing possibilities of a phase-wise removal of export duty on steel and iron ore. The industry on its part, has pointed out that domestic demand is not enough to sustain the large capex plans that mills have announced in view of improved sales in global markets. In the absence of sustainable demand and a long period of duty continuation, mills would have to “revisit capex” and there could be an “adverse impact of divestment of RINL and NMDC’s steel unit”, too.
Fall in prices
The move to hike duty was initiated to rein in the high domestic price of steel. Since then, Indian mills say, not only have exports fallen with them losing out to Chinese competition, but also the prices of benchmark hot rolled coils have crashed in the domestic market.
From a high ₹80,000 per tonne earlier this year, the price of HRC for August deliveries is now at around ₹58,000 per tonne, an over 25 per cent fall from the peak. In the April-June period (Q1 FY23), exports fell nearly 39 per cent y-o-y indicating global weakness in demand and impact of export duty. In June 2022, exports declined by 59 per cent over the same period last year.
Drop in exports
Export of finished steel from India to its key markets that include Europe and West Asia, saw a 17–48 per cent fall in Q1 FY23. According to Ministry data, flat product exports saw a 41 per cent decline y-o-y, in the period under review. Among the categories, cold rolled coil and sheet exports saw the highest fall and stood at 1,16,000 tonnes, down 62 per cent. Export in the year-ago period was 3,05,000 tonnes.
Hot rolled coil sheet and hot rolled coil strips fell 48 per cent and 42 per cent, respectively, for the June quarter. Tin plate sales were down 46 per cent for the period. The hit in non-flat products (also called longs) exports was over 57 per cent. Bars & rods and railway material — part of long products — exports fell 67 per cent and 70 per cent, respectively.
Steel is a deregulated sector where prices are cyclic in nature and are a function of demand and supply, global market conditions, trends in price of raw materials, logistic cost, power and fuel cost etc.