Scrapping export duty on chrome to hit JSL revenue by Rs 300 crore

Government's decision to scrap export duty on chrome will adversely impact India's largest stainless steel maker, Jindal Stainless, which said the move will lead to a Rs 300 crore annual revenue loss.

The government in Budget 2016-17 has proposed to scrap 30% export duty on chrome ore, which is used for making stainless steel and alloys, besides metal plating to prevent corrosion.

"This will impact domestic ferrochrome producers and impact the survival of struggling stainless steel industry as ferrochrome is a vital input for production of stainless steel," a Jindal Stainless (JSL) spokesperson said.

Asked about the impact, the spokesperson said: "It will impact company's revenues by Rs 300 crore annually."

Additionally, the move will also lead to a spurt in prices of domestically-produced stainless steel by Rs 3,000-4,000 per tonne, he added.

JSL Director S Bhattacharya said: "Removal of export duty would only encourage traders to mine the valuable resource and export it. This would lead to a demand-supply imbalance and increase the domestic chrome ore prices."

This will result in increased prices of domestic ore and in return, production cost of ferrochrome will rise, which will impact the cost of production of stainless steel.

Indian chrome ore has higher chromium/iron ratio, which makes its quality better and exports of this ore will only support Chinese stainless steel industry that is dependent on imports of chrome ore, he explained.

Forex earned through export of ferrochrome produced from 4 lakh tonnes of chrome ore would be around $150 million compared to a meagre $50 million by exporting the chrome ore only, the company spokesperson said.

On top of it, the removal of export duty is seen to impact prices of stainless steel to the tune of Rs 3,000-4,000 per tonne due to increased ferrochrome cost.

This is expected to worsen the matter for domestic stainless steel producers that are already suffering due to Chinese dumping cheap products, poor domestic infrastructure and unfair trade practices adopted by overseas suppliers.

Ferrochrome is an alloy of chromium and iron and is used mainly in stainless steel production.

India consumes 2.25 million tonnes (mt) of chrome ore and around 0.93 mt of ferrochrome per annum.

JSL has a capacity of 2.5 lakh tonnes of ferrochrome, which is for captive consumption. Besides, JSL imports ferrochrome/charge chrome for self-consumption.