Steelmakers Seek Import Duty Relief
Faced with a sluggish market, steelmakers expect local taxes to be trimmed in this months Union budget but a cut in import duties appears remote, officials and analysts said yesterday.
The excise duty of 15 per cent is very high. The demand growth has slowed down considerably, said Sanjay Jain of broking firm James Capel B & K.
They are looking at duty reduction, Jain told Reuters. But he did not rate the chances of a change in duties as very high in the federal budget due to be presented in Parliament by finance minister P Chidambaram on February 28.
In a pre-budget report, ICICI Securities & Company (I-Sec), an affiliate of US investment bank J P Morgan, said excise duties might be reduced by 2.5 per cent for bars and rods, as well as for hot rolled coils, to boost demand.
Analysts said rising input costs, stagnant demand from the construction, automobile and white goods segments, a drastic fall in the prices of coils in the world market and a continuing liquidity crunch were severely affecting domestic producers.
They said the cumulative impact of the increase in prices of inputs in 1996-97 (April-March) would have an adverse impact on steelmakers such as the state-owned Steel Authority of India Ltd.
In 1996-97 the government raised coking coal prices by 27 per cent, petroleum products prices went up between 15 and 25 per cent and railway freight was hiked by 10 per cent.
India produced 21.4 million tonnes of finished steel in 1995-96. During the year it imported about two million tonnes of steel, mainly hot rolled and cold rolled coils and semis A S Firoz, economist in the steel ministry, said 1994-95 and 1995-96 were very good years for steel, with an average 21 per cent increase in consumption and 17 per cent growth in production.
In 1996-97 there has been a slowdown again. Production is going up by 14 to 15 per cent but growth rate in demand has come down to six to eight per cent and the year may end up around six to seven per cent, Firoz said.
The recession has taken its toll in the steel sector. The state of affairs may continue in 1997-98, he said. Analysts said SAILs net profit in fiscal 1996-97 was likely to drop by about 40 per cent from last years Rs 132 crore ($36.8 million).
Firoz said the excise duty of 15 per cent for most steel items was very high and could be reduced.
SAIL officials said the company had urged finance minister P Chidambaram to increase customs duty on cold rolled coils and sheets to 35 per cent from the existing 30.
The company has also sought a reduction in excise duty on steel products to 10 per cent from the present 15 per cent, and duty on imported coking coal to be reduced to five per cent from seven per cent.
Jain said the government was unlikely to reduce import duties since it would hit revenues.
Officials said the steel ministry had asked the government not to reduce import duties any further to protect the domestic industry.
Analysts said that at the end of November 1996, Indian steel companies cumulatively held nearly 1.5 million tonnes of unsold steel stocks.
Steel and mines minister Birendra Prasad Baishya told the Parliament on Tuesday that the government was aware of the slump in domestic and world steel demand and was taking steps to support the steel sector. He said the steel ministry was in touch with the finance ministry to clinch some budgetary reliefs and incentives for the industry. He did not give details.
ICICI said the domestic steelmakers were demanding imposition of anti-dumping duties on imports from CIS countries. Analysts said CIS countries were exporting to India hot-rolled coils at a very low price of $270 per tonne, affecting firms like
SAIL whose price for the product was just about competitive. For steel companies the biggest benefit will be anti-dumping duties, Jain said. ($1 = 35.89 rupees)