FY26 Budget: Implications for India's Steel and Metals Industry

India's Finance Minister, Nirmala Sitharaman, today presented the Union Budget for fiscal year 2025-26 (FY'25-26).

The budget introduces key reforms across six domains - taxation, urban development, mining, financial sector, power, and regulatory frameworks. A significant shift includes reducing import duty on copper scrap to zero. Additionally, cobalt powder, lithium-ion battery waste, lead, zinc, and 12 other critical minerals are proposed for full exemption.

In a move to support trade and industry growth, the Indian government has revised the tariff rate on flat-rolled stainless steel products (600mm or more in width) from 22.5% to 15%, effective February 2, 2025, as part of Budget FY26. However, the basic customs duty (BCD) remains unchanged at 7.5%, ensuring no impact on the overall effective duty.

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Budget highlights:

• Power - States will be incentivized to implement electricity distribution reforms and enhance intra-state transmission capacity. These measures aim to strengthen the financial health and operational capacity of electricity companies. Additionally, states that undertake these reforms will be permitted an extra borrowing limit of 0.5% of their GSDP.
  
  
• Critical Minerals Mission - Basic custom duties of cobalt powder and waste, the scrap of lithium-ion battery, Lead, Zinc and 12 more critical minerals have been fully exempted.
  
  
• Export Promotion Mission - Recognizing exports as the fourth engine of the economy, the government will establish an Export Promotion Mission with sectoral and ministerial targets. Led jointly by the Ministries of Commerce, MSME, and Finance, the mission will enhance access to export credit, provide cross-border factoring support, and assist MSMEs in overcoming non-tariff barriers in international markets.
  
  
• Shipbuilding - The Shipbuilding Financial Assistance Policy will be revamped to address cost disadvantages. This will also include Credit Notes for shipbreaking in Indian yards to promote the circular economy. Shipbuilding Clusters will be facilitated to increase the range, categories and capacity of ships. This will include additional infrastructure facilities, skilling and technology to develop the entire ecosystem. Given the long gestation period of shipbuilding, the Minister recommend extending the exemption of Basic Customs Duty (BCD) on raw materials, components, consumables, and parts used in ship manufacturing for an additional ten years.