Steel ministry wants peak import duty to stay

The ministry is of the view that steel industry in India needs to be given a special treatment during the Tenth Plan. This, it says, is important for reaping the benefits from the huge investment of over Rs 65,000 crore made in the sector. While recommending continuation of the existing peak customs duty, the ministry has said that the import duty on seconds and defectives of steel should also be left untouched at 40 per cent.

Citing global trends, the ministry of steel has pointed out that world over countries have created tariff and non-tariff barriers to protect the interests of domestic steel industries. ‘Stiff CVD and safeguard duty actions have been initiated by the US under section 201 and also by the European Union, Canada and China. Mexico has raised steel tariffs from 13 per cent to 18 per cent and then to 25 per cent, Venezuela and MERCOSUL countries raised tariffs to 35 per cent. Thailand imposed surcharge on steel and Australia has introduced cumbersome packing standards,’ it says in its note to the finance ministry.

It further adds that the world market is fraught with certain elements, like good demand growth with likely price depression, restrictive market access and regional disparities. ‘For net exporting countries, domestic demand pattern is likely to prove crucial. Any fresh measures restricting free access of its exportable products would result in distorting equilibrium in the domestic market,’ the ministry stated.

The steel ministry while forwarding its Budget recommendations has said that the temporary turnaround in domestic industry can only be sustained if it is backed by concrete measures aimed at substantial demand generation. ‘There is a need for a sectoral approach specific to steel, and the industry needs a special treatment in its endeavour to serve the growing needs of the economy during the 10th plan period,’ says the ministry in its note.

According to the ministry, despite cost overruns of Rs 21,000 crore, last mile projects should be given a special thrust to realise anticipated yields. It has also been pointed out that this demand can be generated through an investment in the infrastructure sectors and removal of bottlenecks (projects clearance, financial closure) for private sector investment.

Countries such as Singapore have spent $3.5 billion and Hong Kong $600 million on infrastructure. China’s spending on infrastructure is sustaining steel consumption. It accounts for nearly a quarter of global steel consumption.

For infrastructure spending, the government should increase public saving, undertake disinvestment of PSUs as per target and utilise funds for infrastructure investment.