Steel industry demands export duty on HR coil

NEW DELHI: After export duty on iron ore, should there be a similar impost on semi-finished steel? The downstream steel industry has sought a 10% export duty on semis and hot-rolled coils to curb “artificial shortage” of these goods in the domestic market, due to the proclivity of primary steel producers to tap the lucrative export markets. In a letter to the steel minister Ram Vilas Paswan, the cold rolled steel manufacturers’ association (Corsma) said the impost was necessary as high steel prices were affecting not only various industrial consumers including cold rollers but also SMEs and consumers in the semi-urban and rural areas.

“India has surplus capacity for the production of finished steel. The shortages have arisen mainly due to the diversion of billets/booms and HR coils to the export markets,” according to Corsma. It may be noted that the steel minister had in 2005 imposed informal curbs on exports by asking PSUs like steel to export less. The minister, in the recent meeting of the steel consumers’ forum, also expressed concern over the spiralling steel prices.

The association which represents over 70 steel mills in the secondary industry alleged that the average domestic prices of HR coils have sharply risen by around Rs 8,400 a tonne since March 2003. This price rise, it said, was without justification and about Rs 5,000 higher than ‘global prices’.

Citing that many countries have taken fiscal and trade control measures in the overall interest of their manufacturing industries, steel producers’ body pitched for a reduction in Customs duty on HR coils, semis and re-rollables from 5% to 2%. “China is producing around 450 million tonnes of steel but it has withdrawn all tax rebates and imposed a duty of 10% on export of billets and 5% on export of HR coils,” said Corsma.

Quoting official figures, Corsma said the net availability of finished steel from domestic sources in 2006-07 was 39.64 million tonnes as against the actual consumption of 43.74 million tonnes. This left a gap of over 4 million tonnes which was to be met through imports. According to Corsma, the actual demand was even higher. Even though they wanted, SMEs could not import due to financial and operational constraints. “The effective gap was 6 million tonnes,” said Corsma.

High steel prices had a major impact on inflation and eroded the economic viability of many manufacturing industries. India is one of the cheapest producers of HR coil but the domestic prices are the highest due to profit margins ranging from Rs 7,000-10,000 a tonne.