Ministry Opposes Pig Iron, Cr Coil Duty Cuts

The steel ministry has analysed the ramifications of the reduction in customs duty on pig iron and cold-rolled steel proposed in the 1997-98 budget and is planning to take up the matter with the finance ministry. The move follows steel companies protest against the proposals.

The ministry has taken strong objection to the lowering of import duty on cold rolled coils by 5 per cent and on pig iron by 10 per cent and the proposal to introduce a tariff policy under which the rates of raw material will be at par with finished goods.

The duty cut will eventually lead to sickness of cold-rolled manufacturers whose margins would be the worst affected, says a recent communication of the steel ministry available with Business Standard.

 

According to the ministrys estimates, the landed cost of cold-rolled coils was Rs 703 lower than the stockyard price in the post-budget estimates compared to the period before the budget, when the landed cost was about Rs 223 higher than the stockyard price. The ministry had proposed Rs 3,472 as the ideal difference between the landed cost and the stockyard price.

The ministry says there should be a gap of 5 to 10 per cent between the duty rates on hot-rolled coils and cold-rolled coils.

With strong linkages within the steel sector, the HR coil manufacturers will be affected in the long run as they are the primary suppliers of raw material to the CR coils units, says the ministry.

The reduction in duty is also expected to hit other sectors like the galvanised plain sheets and the galvanised corrugated units as most of them have captive CR coil lines.

The import duty on pig iron has been cut to a level lower than what had been recommended by the Chelliah Committee and this has created difficulties for the industry. Due to a fall in international prices and depreciation of the rupee, the landed cost has already declined. It is expected to fall further with the imposition of the new duty rates.

The major CR coil manufacturers include the Bokaro and Rourkela steel plants of Steel Authority of India, Jindal Steel, Nippon Denro Ispat, Raymond Steel and Comet Steel. Major pig iron plants include the Bokaro steel plant, Durgapur Steel, Rourkela Steel, Indian Iron & Steel Company, VSP and Usha Ispat. The reduction in duty on ferro-alloys from 25 per cent to 20 per cent will help few steel makers and create difficulties for the domestic producers of ferro-alloys, says the steel ministry.

In the communication, the ministry has favoured the inclusion of re-rollable scrap within the ambit of customs tariff. The ministry had been insisting on inclusion of this item for the last few years which it said should be at par with the duty cuts on billets. With the landed cost being reduced by Rs 823, the re-rolling industry would be in a position to increase its production.