Export duty hike on steel products likely to impact projects under PLI scheme
- The Centre increased export duty to 50% on iron ore and concentrates categories from 30% which is now applicable on lumps above 58% iron content. Further, iron ore pellets which currently do not attract any export duty - a 15% duty has been levied.
India's imposition of export duty on iron and steel intermediates is likely to impact projects under the PLI scheme. The Indian Steel Association (ISA) on Saturday said the export duty will send a negative signal to investors and that could adversely impact capacity expansion projects under PLI.
On Saturday, the Finance Ministry levied export duty on 11 iron and steel intermediates and trimmed import duty on three key raw materials for steel production and three inputs for making plastic items. The move to reduce import duty on some raw materials including coking coal and ferronickel is to lower the cost for the domestic industry and bring down the prices.
Also, the Centre raised the duty on exports of iron ore up to 50%, while the duty on a few steel intermediaries was hiked to 15%. This has been done to increase domestic availability.
ISA in a PTI report welcomed the removal of import duty on coking coal and a few other input raw materials for the industry.
However, ISA in its statement said that imposition of export duty on steel will only send a negative signal to investors in the steel sector and will adversely impact the sector's capacity utilisation. India has been increasing its engineering and steel exports over the last two years and has the potential to become part of a larger global supply chain.
The association explained that India could lose the export opportunities now and this decision may also impact the overall economic activity in the country.
Further, ISA pointed out that the hike in export duty may help other countries to increase their share in the global market, which India will vacate.
It added in the report, that rebuilding the lost ground may take a very long time, as the supply chain will be disrupted, while India's credibility as a reliable exporter will take a hit.
Further, ISA highlighted that the domestic steel industry has made the largest investment commitments ranging from 36% to 40 % of total investments committed by the entire manufacturing sector. These investments in capacity building are needed to achieve the Atmanirbhar Bharat Vision.
With the hike in export duty, ISA expects new capacities creation to get impacted as they would be seen as uneconomical thus affecting the much-awaited investment against the PLI scheme for speciality steel.
Also, ISA believes the export duty hike could have a major impact on the entire supply chain in the long term. The economic activity of a few states dependent on minerals and steel will be further hit.
These measures need to be deliberated and then a calibrated approach may be taken. The steel industry continues to remain committed to nation-building, as per ISA's note.
The FinMin trimmed import duty on coking coal and anthracite (high energy coal) to zero from 2.5%. The same has been lowered in lowered import duty on ferronickel, an alloy containing iron and nickel from 2.5%. Also, the duty of import on coke and semi-coke has been reduced to zero from 5%.
Also, import duty on naphtha has been reduced to 1% from 2.5%, while duty on propylene oxide has been cut to 2.5%. Moreover, the import duty on polymers of venyl chloride is reduced from 10% to 7.5%.
On the other hand, the Centre increased export duty to 50% on iron ore and concentrates categories from 30% which is now applicable on lumps above 58% iron content. Further, iron ore pellets which currently do not attract any export duty - a 15% duty has been levied.
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First Published:22 May 2022, 04:30 PM IST
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