THE steel industry, which is going through a downturn, has not received anydirect aid from the Budget. The budget failed to give any increases in thecustom duty for any steel products nor any concessions to the sector interms of a reduction in the excise duty.The current excise duty is at 16 per cent on finished goods. Any slash onthis would have had a positive impact but the Budget has not even reducedtaxes on any inputs.
The only silver lining is the proposal to promote infrastructure projectswhich will help the industry by propping up demand.
Ispat Industries joint managing director Vinod Mittal, reacting to theBudget proposals, said although the finance minister has taken a number ofinitiatives to kick-start the second stage of economic reforms, no directrelief has been provided to the steel industry. As far the steel industry isconcerned, Mr Mittal, said the Budget is a `disappointment'.
He pointed out that the Railway Budget has already added to the steelindustries burden with the 3 per cent increase in the freight rates.However, he said though this will not have much negative impact on theprivate players as most of them are based near the markets. However, Tiscoand SAIL will be effected as a large chunk of their finished products aretransported by rail.
The new generation integrated steel manufacturers - Essar Steel, IspatIndustries, Jindal and Lloyds Steel - in their pre-Budget memoranda, hadasked the finance minister to undertake a host of measures, includingincrease in the customs duty on steel and steel products to the WTO levelsof 40 per cent.
In its recommendation to the steel ministry, Indofer Society, anassociation of steel companies, had suggested a 5 per cent increase in thecustom duty on cold rolled coil and sheet from 35 per cent to 40 per cent.Indofer had also asked for an increase of the custom duty on hot rolled coilfrom 25 per cent to 30 per cent, and on plates from ship breaking to 20 percent from 5 per cent. But nothing of the sort has come through.
These companies had recommended continuation of the minimum floor priceregulation till an alternative mechanism to restrict the import of cheap andunfair priced steel are in place.
Producers have also expressed concern on the import of seconds or defectivesteel under duty exemption scheme, as 50 per cent of the import are in theform of seconds or defectives. However, Mr Sinha has not taken the views ofthe industry seriously as no direct steps have been suggested in the Budget.Seconds have a major share in this, it is likely that prime materials arebeing imported in the garb of seconds and defectives, with the objective ofdefeating the stipulated floor price of $302 per tonne. Further, secondsshould not be allowed in the industrial and white goods sector as it willreflect the poor quality of finished goods.
Imposition of the additional duty on import of seconds and defectives wasalso recommended. The additional incidence of duties will result in thehigher landed cost of seconds and defectives and thereby would have been afiscal deterrent for cheap imports.
Manufacturers had also expressed concern about import against advancedlicences, as these imports are being sold in the domestic market. Theindustry had sought for restrictions in exemption for anti-dumping duties onimports against advance linences, no steps have been taken in thisdirection. Industry sources have pointed out that a reduction in the exciseduty on galvanised items would have gone a long way in boosting demand forsteel, and the loss of revenue could have been made up by substantiallylarge sales volumes as a result of increased demand.
They further pointed out that duty on zinc and other non-ferrous metals,which was sought to be reduced from 30 per cent to 20 per cent, has met withno response from the finance minister.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
