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Madhumita Chakraborty
New Delhi, Feb 27: The steel industry decided to keep its chin up, drawing succour from the macro stability that the Union Budget is expected to bring, even though `Santa' (Klause) Sinha brought no special gifts for steel-makers.On the contrary, the finance minister raised the excise duty on steel by one per cent in the process of rationalising tariff. The excise duty on steel went up to 16 per cent from 15 per cent.
He did give some relief to CR mills, by increasing the import duty differential between CR coils and its key input, HR coils. CR coils will continue to attract an import duty of 35 per cent, but the duty on HR coils comes down by five per cent to 25 per cent.
The 10 per cent surcharge on customs duties would, however, prove an indirect protection to the steel industry, fighting competition from cheap steel imports from overseas. The real boost to steel-making will come from the fiscal sops announced for construction and building activities.
``The Budget is forward looking, with welcomeinitiatives in the housing and infrastructure sector,'' said Steel Authority of India Limited (SAIL) chairman, Arvind Pande. SAIL makes 30 per cent of the steel structurals that go into the construction work.
Pande also lauded the rationalisation of customs and excise duties, incentives for the capital market and extension of Modvat to 100 per cent. The SAIL chief, saddled with a bloating manpower, also welcomed the support to VRS for public sector enterprises. The finance minister has allowed public sector enterprises to issue government guaranteed bonds for employees opting for the VRS schemes.
``The emphasis on housing and infrastructure and the overall rationalisation should work out to the benefit of the steel industry,'' Pande said. Jindal Strips vice-president (corporate finance) Arvind Parakh was more candid.Parakh said the Union Budget did contain a medium-term strategy to strengthen the fiscal system but had very little for industry in the immediate future. ``It is going to be a tough year,''he said.
The Budget, said Sponge Iron Manufacturers Association of India (SIMA) chairman and the youngest scion of the O P Jindal Group, Naveen Jindal, ``is extremely disappointing for the sponge iron industry.'' The industry had sought a 10 per cent cut in excise duty, but is now saddled with a one per cent hike in excise duty to 16 per cent.
Jindal pointed out in a statement, that sponge iron was an input for induction furnaces, which were not entitled to Modvat benefits. ``The customs duty on steel scrap, which is a substitute for sponge iron, has been reduced to five per cent, whereas on non-coking coal, which is a raw material for sponge iron, the duty has been increased from 10 per cent to 15 per cent,'' he said.
The other segments of the iron and steel industry have no freebies either, but prefer to draw succor from the ``macro-stability'' that the fiscal measures are expected to bring in the long run.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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