The government has proposed to cut import tax on steel products further to bring it to zero or close to zero to provide relief to MSMEs, which have been hit hard by high raw material prices in the context of pandemic is raging.
Leading Government sources say that the decision has been taken to review tariffs on steel products and reduce or completely recall some items in order to help the affected consumer industry. heavily due to rising metal prices in the domestic market.
In addition, reduced import duties will help maintain supply lines that have been affected with some domestic steel companies reducing steel production to divert medical oxygen supplies for Covid-19 relief measures.
In the 2021-2022 budget, Finance Minister Nirmala Sitharaman revoked the anti-dumping duty (ADD) and countervailing duty (CVD) on certain steel products and reduced the uniform customs duty to 7.5 % for semi-finished, flat and long non-alloy, alloy and stainless steel products from 10-12.5% of the previous level. And also lowered import tax to 0% on scrap steel to support consumer industries hit hard by the sharp rise in steel prices.
These taxes can now be withdrawn or further reduced
“Steel prices have continued to remain stable and have increased further in recent months. This is making the operation of some user industries difficult, especially in the context of market disruptions caused by disruptions to the market. The import tax cut will help curb steel prices as global steel prices rise in some markets still below domestic prices.This measure will also help supply steel flows if domestic steel production is in short supply. shortfall due to steel producers using another source of oxygen input for Covid-19 relief,” the official source cited before.
It is expected that the tax reduction on steel will be announced by DGFT shortly after receiving the official approval of the Ministry of Finance. A call must be made to reduce the tariff rate mainly at 7.5% to 2.5% or withdraw it completely for the time being.
Domestic hot rolled coil (HRC) prices rose to a multi-year high of Rs 56,000/mt in February 2021 from Rs 39,200/mt in March 2020 due to improved demand amid supply limited iron ore supply and high global prices. This figure was further increased to more than Rs 58,000/ton in April, an increase of more than 50% in the past 13 months.
With demand for steel remaining high and China cutting export offers to steelmakers to support domestic demand, Indian steel prices are expected to continue to rise. The tax cuts are expected to soften prices in the domestic market while also creating competition for domestic steelmakers from traders securing cheaper metals from abroad.
The steelmakers, who spoke on condition of anonymity, said the move to cut import duties would be detrimental to the interests of domestic steelmakers as it could flood the market with cheap and poor quality steel being dumped. prices in this country. They think that the steel market is giving a signal that the domestic steel industry may be profitable after a long time. But tax cuts could change the cycle again.
According to a recent report, in the current scenario where demand in India is moderate due to the second wave of Covid-19 and business activities stalled, Indian steel mills will be able to move large volumes of steel to export markets and remain highly profitable, according to a recent report from ICRA.
But the tax cuts will reduce profit margins and bring more export products back to the domestic market.
Information resource: Satthep.net