Price hike inevitable if stimulus is withdrawn: Steel industry

The domestic steel industry, which raised prices in wake of some stimulus measures being withdrawn after the last Budget, has warned of another price hike if stimulus is completely withdrawn in Budget 2011-12.

Steel prices had risen by as much as 6 per cent after excise duty concessions were removed in the previous budget. This year could also see a similar increase post-Budget. “We will have no option but to pass on the burden to the consumers if excise duty concessions are withdrawn,” said an industry official.

The steel industry has also reiterated its long standing demand of being accorded infrastructure status.

Steel firms have asked the Finance Ministry to grant infrastructure status to the steel industry. Such a move by the Finance Ministry would ensure long-term funds and tax holidays for the steel industry.

“SAIL has submitted its demands and expectations from Budget 2011-12 to the Finance Ministry. The crux of it is that we want steel to be given infrastructure status. This would help in securing long-term funds for the expansions taking place in the domestic steel industry,” a SAIL spokesperson told Business Line.

For the growth of industry, steel makers along with Associated Chambers of Commerce and Industry (ASSOCHAM) has called on the Finance Ministry to raise import duty on Hot Rolled Coils (HR Coils) to 10 per cent from the current 5 per cent.

“Pro-active policy measures adopted by Government of India can help extend HR Coil capacity by an additional 8 million tonnes during 2011-12, making India surplus for HR Coils by more than 6 million tonnes,” said ASSOCHAM in a statement.

During the current financial year India has imported 2 million tonnes of HR Coil already. ASSOCHAM has also outlined four fundamental factors that present adverse scenario for Indian steel companies producing HR Coils – excess capacities in China and CIS countries, cost competitiveness due to cheap source of raw material especially coking coal, 9 per cent incentive given to Chinese exporters, new HR Coil capacities are still developing in India.

Export Tax on Iron Ore

Steelmakers have also asked the Finance Ministry to increase the export duty on iron ore. “Recent hikes in steel prices have been mainly driven by the increasing commodity prices. To contain this, the Government should consider increasing the export duty on iron ore,” said a Jindal Steel and Power Ltd spokesperson.

The Government had last year raised export duty on iron ore lumps to 15 per cent. The industry expects at least a 5 per cent increase on the export of iron ore lumps, but it wants duty to be increased on iron ore fines as well.

“It is time we start conserving iron ore fines as technology is coming up which will also make domestic steelmakers to use iron ore fines increasingly,” said an industry official.

Small Scale Industries Worried

Meanwhile, small industries have expressed concern over the rapidly increasing steel prices. Small scale industries have called on the Finance Ministry to remove import duty on steel. The request comes in wake of steel prices shooting up by over 30 per cent in the last two months, on fears of possible increase in coal prices from the major producing nation Australia.

“Steel manufacturers have increased prices by 30 per cent in the last two months anticipating that Australia may hike the coke price in view of the recent floods that impacted its coal mines,” The All India Confederation of Small & Micro Industries Association President, Mr Sudarshan Sareen, said.

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