India: Duty on steel exports likely?

In a significant development late on 21 May'22, India's Finance Minister Nirmala Sitharaman tweeted that the government was "calibrating customs duty on raw materials and intermediaries of iron and steel to reduce their prices." Import duty on some raw materials will be removed, the minister informed.

The minister further informed that the government was also considering imposing export duty on some steel products.

Following the Russia-Ukraine war, global and domestic steel prices had risen sharply amid rising energy prices leading to global inflation. An export duty on steel is likely to result in higher domestic supplies, thereby exerting downward pressure on prices.

Firm steel prices and surging post-pandemic global steel demand led to significant exports by Indian suppliers to traditional and emerging markets. India's s steel exports in FY'22 stood at around 20 million tonnes (mnt), as per SteelMint data.

Similarly, the government has taken into reckoning the fact that higher domestic steel prices have impacted demand and the surge in steelmaking raw material prices is affecting the operations and profitability of the domestic industry.

Therefore, in line with its earlier move of lifting the import duty on ferrous scrap announced in the Budget, the government is seeking to ease the pressure on domestic producers by removing import duties on raw materials.

Moreover, the government's effort to tame the effects of inflation in the iron and steel sector is in consonance with its overall policy of preserving supplies for the domestic market by seeking to control exports. The recent ban on exports of wheat is a case in point.