It was hoped that the BJP-combine's union budget will initiate measures to boost the demand of steel and also remove several bottlenecks and road-blocks. Thus, the steel industry had a number of expectations from the budget for itsrevival. For boosting the demand, it will put more emphasis on the creation and strengthening of infrastructure. It will also give priority and allocate more funds to the housing projects. Steel Industry was also expecting that the process of gradual reduction in the customs duty on steel will be reversed and instead, the rates of customs duty on certain items like CR and HR Coils will be increased. It was also expected that the anti-dumping duty would be imposed on certain items like CR Coils, HR Coils, etc. Which are being dumped by CIS countries as also the SE Asian countries.

The industry has also been demanding that the central excise duty on items falling under chapter 72 of the central excise tariff will be reduced from 15 per cent to 10 per cent, if not eight per cent. The rerolling mills and induction furnaces have been demanding the removal of central excise duty based on their rated capacities and instead levy the same on the basis of their actual production.

The FM's budget on the whole hasbeen beneficial to the steel trade industry as a large number of expectations have been fulfilled. Firstly, there is substantial increase in the outlay on infrastructural development programmes. Similarly, there is provision for more outlay on housing schemes. Both these measures are likely to give a boost to the steel industry, provided these are properly implemented. Secondly, special non-modvatable additional customs duty of eight per cent has been imposed on all imported materials. Thus, heeding the suggestion of CII for imposing such duty to provide a level playing field to domestic industry. Thirdly, the customs duty on cold rolled coils has been raised from 25 per cent to 30 per cent. Prior thereto, the rate of customs duty on CR and HR coils was the same, that is 25 per cent. By raising the customs duty on CR Coils, the previous anomaly has been removed. Further more, customs duty on stainless steel scrap has been reduced from 10 per cent to five per cent.

Steel Industry is however, disappointed asthe rate of central excise on steel products falling under chapter 72 has not been reduced from 15 per cent. This is in spite of the fact that the working group appointed by the ministry of steel had recommended the reduction in central excise on steel products as according to them, the rate of 15 per cent was on the higher side and needed to be reduced. The finance minister has not acceded to their request, with the result that there is considerable disappointment amongst the steel producers.

Most of the industry organisations including the Confederation of Indian Industry were demanding the imposition of customs duty on all imported materials including steel as in their view, large-scale imports with lesser customs duty were harming the interest of domestic producers, so much, that some of them have been forced to close down or restrict their production. The FM's proposal to impose a special non-modvatable additional customs duty of eight per cent across most of the steel products will help to some extentsuch producers. Actually, in effect, the burden of customs duty is much more than eight per cent. It is somewhere between 11 and 14 per cent. It will definitely help some steel producers, particularly those of flat products.

The stainless steel sector of the steel industry is happy with the rate of customs duty on stainless steel scrap for melting purpose having been reduced from 10 per cent to five per cent. This will definitely benefit them. However, the sponge iron manufacturers are unhappy as they fear that this step will result in lesser consumption of HB/Sponge Iron.

As a result of the imposition of eight per cent special additional customs duty coupled with five per cent increase in customs duty on CR Coils, some main producers like SAIL and Essar, Tatas are expected to benefit and their bottomline will improve. It is understood that some of them have raised the price while others are in the process of raising the prices of their flat products.

Mini steel plants are unhappy as the FM has nottaken into consideration their suggestions and completely ignored them. They are really in a very bad shape. Majority of them have closed their shutters and others are partially operating. They were expecting some relief in the form of reduction in central excise from 15 per cent to five per cent. It is only those mini steel plants which are producing the value added products which are surviving. They are also unhappy as imported steel steel melting scrap and sponge iron will cost more on account of the imposition of eight per cent non-modvatable customs duty.

The steel trade is also disappointed. It has been representing that the modvat credit under the central excise should be allowed to be passed on by them beyond two stages which was the practice till two years back. They have been representing that the procedure to pass on modvat credit at least by fifth stage be allowed. This has not been done. As a result of this, a number of steel traders continue to be adversely affected.

The steel trade has alsobeen representing that in the case of materials purchased by them from the rerolling mills and induction furnaces, they should also be allowed to pass on modvat deemed credit of 12 per cent. If the actual users purchase materials directly from the induction furnaces or the rerolling mills, they are allowed to pass on deemed credit to the extent of 12 per cent. This facility has not been extended to the trade. It is the earnest demand of the steel trading community that they should also be allowed to pass on the deemed modvat credit to their customers when they purchase materials from the induction furnaces or the rerolling mills. Thus, there have been mixed reaction to the budget as it affects different sectors of steel industry and trade in different ways.

(The author is the secretary of Steel Chamber of India)