The Steel Ministry, along with the Commerce Ministry, has reportedly initiated the process to review export duty and a phase-wise removal is being mooted, those aware of the development said. The Ministry is said to be in favour of removal of duty on stainless steel in the first phase.

As per an internal document / presentation of the Steel Ministry at a meeting on September 5, it was pointed out that stainless steel is an export-dependent item and its numbers could improve if duty is removed.

However, HR coils and CR coils – two key items that have been driving steel export numbers – should not be immediately opened up as it might lead to increase in domestic prices, the Ministry presentation, accessed by BusinessLine, said.

In fact, a footnote there held that “Export duty of HS7222 (stainless steel bars and rods) and HS7219 (stainless steel flats) may be considered for removal” while adding that: “In view of this, reduction in duty may be considered after stabilisation of the volatile market condition. And cooling of inflationary pressures and the steel price trends in the next quarter (December-end).”

According to the ministry document, nearly, 80 per cent and 42 per cent of the total production of stainless steel long (bars and rods) and flats items are sent overseas. Moreover, these items are seen to have a lower share in the total production of finished steel. Post the imposition of duty, stainless steel long products (bars and rods) was the only category that saw a growth in export.

Related Stories
Exports slows down further to $33.92-bn in August
Trade deficit more than doubles as petroleum, coal push up import bill

“The export duty on steel, especially on stainless steel, has been hurting the MSME sector the most. That is why the government has been especially requested by the engineering goods sector to remove duties on stainless steel on priority,” an industry source said.

India imposed hefty duty on exports of steel, iron ore and stainless steel, May 22 onwards. The duty levied was 15 per cent on flat-rolled products of stainless steel and 15 per cent on bars and rods, angles, shapes and sections of stainless-steel while a waiver of 2.5 per cent import duty was announced on ferro nickle (a key stainless steel raw material).

Concerns over steel price

According to the Ministry document, steel demand is expected to go up post monsoon – April to June are considered to be slower months for steel demand while July to September are the worst. Additional demand of 3.5 million tonnes (mt) is expected to be generated on account of push towards infrastructure. Hence, in such a scenario, “rolling back export duty may aggravate steel prices”, it held adding that a “duty roll back may give unintended signals to market to prefer exports over domestic demand.”

Post levy of duty (May 22 onwards), Indian steel price dropped by 9-14 per cent by June 10 (versus May 20). The Ministry held that “price decline after June 10 moderated”.

“Decline vis-a-vis May 20 in the range of 5-17 per cent by August 19...” the internal note said, adding that decline post July 2022 was in the range of 1-2 per cent.

In terms of category-wise description, “easing up of exports” like coated or plated steel, hot-rolled coils and cold-rolled coils would “put pressure on price”. On the other hand, bars and rods, alloy steel bars and rods, which include TMT bars, are expected to witness improved demand “post lean season”.

Industry concerns

Incidentally, the industry has already pointed out that exports to European Union or Italy of TMT bars is “feasible” only without export duty .

It pointed out price of all export items – TMT, HR coils, CR coils, GP sheet – in India were higher than Chinese offerings leading to competitive disadvantage.

For instance, HR coil price (ex-works) in August was ₹61,363 per tonne before export duty and ₹70,566 per tonne after levy of duty. In comparison, Chinese offerings were ₹46,374 per tonne. Similarly, CR coil price was ₹68,174 per tonne before duty and at ₹78,400 per tonne post duty levy while competing Chinese offerings were ₹50,941 per tonne.

“No export of steel is feasible with export duty of 15 per cent after including logistic and shipment charges. And neither does the industry under supply to domestic buyers to push exports. This premise is incorrect,” an industry official said.

social-fb COMMENT NOW