29 Jan 2020

Budget 2020: Steel industry looks for duty protection

Apart from changes in the import duty structure, the industry hopes the Budget has enough to boost auto and infrastructure sectors, the two biggest consumers of the metal.

While the steel industry may have its own demands and wishes from the upcoming Union Budget, it will be more than happy if Finance Minister Nirmala Sithraman instead focuses on two industries - auto and infrastructure.

Both the sectors have been distress, and that has been a cause of worry for all steelmakers, including Tata Steel and JSW Steel. Car sales fell by 19 percent in 2019 and core infrastructure sectors shrank for the fourth straight month in November.

The data is of paramount importance for the steel sector because infrastructure sectors consume nearly half of the steel produced in the country while auto companies account for a little less than 20 percent.

While the Finance Minister in December had unveiled a Rs 105-lakh crore boost for the infrastructure space, the pundits will be keen to understand details on funding and break-ups. As for the auto sector, it remains to be seen if the FM gives them relief, especially on the GST front.

Any fillip to these two sectors will be a boost for the steel sector, which saw its growth rate further slump in November. JSW Steel, which recently announced its third quarter results, suffered a 88 percent drop in its consolidated net profits. 

Though the companies have managed to increase steel prices in the last three months, and inventory levels are also down, the industry would need a boost from the Budget for demand to pick up from auto and infrastructure clients.

Specific demands

By itself, the steel industry is hoping for reliefs on duty side, from the Finance Minister.

“It will hugely benefit if the industry gets help in the form of reduced duty on the import of coking coal,” said JSW Steel Jt Managing Director and Group CFO, Seshagiri Rao. “Also, border adjust tax should be brought in to protect the industry from cheap imports,” he added.

The industry overall has in fact asked for  relief on imports of different kinds of coal frequently used in making different grades of steel. These are anthracite coal and coking coal.

The companies, and backed by industry body FICCI, have requested that import duties on both be reduced to nil, from the present 2.5 percent. This will help bring down the cost of production.

A border adjustment tax will help Indian steel companies gain parity against cheap imports. That is especially so, points out Rao, as steel companies pay a cess of Rs 400 a ton. The cess are of several kinds, including a clean energy cess.

Around 8 million tons of steel is imported annually, mainly from countries with whom India has signed free trade agreements.

Put together, higher demand from clients and lower costs will help steel industry manage its financials, well.

Reference: Moneycontrol.com

Related Files: