Export duty on flat steel to be rolled back

The high-powered Committee of Secretaries today decided to roll back the 15 per cent export duty on flat steel products...

The high-powered Committee of Secretaries (CoS) today decided to roll back the 15 per cent export duty on flat steel products and also agreed to impose a 15 per cent ad valorem duty on export of iron ore. It, however, retained the export duty on long products used in the construction industry to ensure availability at affordable prices.

At a meeting chaired by Cabinet Secretary K M Chandrasekhar, the CoS agreed to the Steel Ministry’s proposal to roll back the export duty on most steel products after taking note of the 10 per cent dip in steel prices in the domestic market. What tilted the decision in favour of steel companies was their decision to cut prices by Rs 4,000 a tonne and their commitment to hold the price line for three months, a senior government official told The Indian Express.

In May, the government had imposed a 15 per cent export duty on semi-finished products and hot rolled coils/ sheet, 10 per cent on cold rolled coils/ sheets, pipes and tubes and 5 per cent export duty on galvanised steel in coil/ sheet form.

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Endorsing the government’s concerns on inflation in their meeting with the Prime Minister, top steel companies including Tata Steel, Essar, JSW and Jindal offered to reduce prices and assured that the domestic demand-supply mismatch would be bridged. Between January and April this year, pig iron prices jumped over 70 per cent, construction steel such as TMT and wire rods by over 36 per cent and HR coils by more than 40 per cent.

More importantly, the CoS has applied brakes on the multi-million dollar domestic mining industry’s free run on iron ore exports by endorsing the Steel Ministry’s proposal to impose 15 per cent ad valorem duty on its exports. “The mining companies will take a combined hit of around Rs 8,000-10,000 crore,” Federation of Indian Mineral Industries (FIMI) secretary general R K Sharma said. The Federation of Indian Chambers of Commerce and Industry (Ficci) has said that the export duty would affect prospective investments worth Rs 1 lakh crore. In a representation to finance minister P Chidambaram, it said that the government’s decision would not only affect revenues of steel companies, but also their prospective investment plans.

It noted that performance of the steel sector has shown signs of a slowdown, with production of finished steel growing by a meagre 5.1 per cent in April-March 2007-08 compared with a 13.1 per cent increase in the previous fiscal. Ficci observed that the Reserve Bank of India (RBI), in its survey, found that the gross profit margin ratios of 105 iron and steel companies declined in the first quarter of this fiscal vis-a-vis the first quarter of the last financial year.