What Indian Steel Industry is Expecting from Budget 2018-19?

Indian steel industry which was reeling under pressure of cheap imports and tepid demand since past two years had a sigh of relief in last financial year of 2017-18 amid trade restrictions on imports and improved domestic demand.

While Indian government is set to announce its annual budget on 1 Feb'18, let us have a look as to what steel industry participants are expecting from this budget of financial year 2018-19.

Removal of import duty on coking coal

Ahead of budget 2018-19, Indian steel ministry has requested the finance ministry to reduce import duty on coking coal to zero from current 2.5%. In last year's budget also steel ministry had made the same request but no announcement was made by the government.

India is heavily dependent upon imports to meet its domestic coking coal requirements as domestic coal has high ash content and is not suitable for Indian steel manufacturing facilities. India's coking coal imports have increased by 9.9% y-o-y basis from 46.7 MnT in 2016 to 51.3 MnT.

With the increasing input costs (imported coking coal prices that has increased by 10% y-o-y basis) it has become imperative for the domestic steel manufacturers to seek measures to balance out their production costs.

Indian steel companies are also requesting for exemption from environmental cess as there is no substitute reducing agent for steel making.

Removal of import duty in ferrous nickel and stainless steel scrap

Indian Stainless Steel Development Association (ISSDA) has sought the removal of customs duties on key raw materials used in producing stainless steel.

After the announcement of zero import duty on nickel in last year's budget, ISSDA has requested that the import duty on ferro-nickel to be reduced to zero from 2.5%. This is because India do not have nickel resources and has to depend upon imports to meet its domestic requirements.

For the manufacturing of stainless steel in electric furnace, stainless steel scrap is the key raw material. This scrap is not available in India and has to be imported. Thus, ISSDA has demanded removal of customs duty on import of scrap from current duty of 2.5%.

In context to this, ISSDA President, Mr. K.K.Pahuja said "it is absolutely necessary to preserve competitiveness of Indian Stainless Steel Industry at a time when Government is building new trade relations with other countries and we appeal to the Finance Ministry to remove basic custom duty on both Ferro-Nickel and Stainless Steel Scrap".

Revoking anti-dumping duty and imposition of export duty on graphite electrode

Domestic prices of graphite electrode, a key raw material for steel manufacturing in electric arc furnace have sky rocketed this year amid its supply constraints. Following fall in China's graphite electrode exports due to its increased domestic demand, Indian manufacturers took advantage of the situation and diverted their production to the export markets.

Indian exports of graphite have increased by 49% while imports have registered only 13% decline. This has created supply constraints in the country. Thus, in order to cope with this situation, industry participants are demanding removal of anti-dumping duty on graphite electrode and imposition of export duty on its exports.

Boost to steel demand from Infrastructure sector likely?

Infrastructure is one of the key end user industries for steel with percentage share of more than 50% in country's total steel consumption. India's steel demand suffered over the last two years due to the slack in infra and real estate sector.

However, according to reports, the government has announced its plans to prioritize investments in infrastructure sector in this year's budget. The annual budget for road project is anticipated to increase from INR 40,000 crore to INR 1,30,000 crore while the ministry has already sanctioned INR 1,00,000 crore for irrigation projects in Maharashtra's draught prone areas. These measures are likely to push the country's domestic demand for steel in the coming year.

Basic Customs Duty on Steel Goods