Import Duty on Steel may be Axed

Import Duty:

After slashing the import duty on edible oil, the government's radar has moved on to steel prices. It is mulling the abolition of import duty on all grades of steel. The current tariff is about 5 per cent. The steel ministry has forwarded a proposal to this effect to the finance ministry, official sources say. India imports 6.5 million tonnes of steel a year, less than 13 per cent of the domestic consumption of 51 million tonnes.

Current domestic prices are about $950 per tonne, about $50 more than the international steel prices. Industry analysts say without duty, steel imports could rise to around 9 million tonnes. Steel has a major inflationary impact, affecting the cost of automobiles, consumer durables and construction. If approved, this would be the second attempt in recent years to check steel prices through import duty cuts.

Last time, the previous National Democratic Alliance government had slashed the import duty from around 15 per cent to 5 per cent in 2004, months before the general elections, which it lost. Sources said the steel ministry would prefer abolishing the import duty on steel rather than levy an export duty of 10 per cent, since exports would still add to the net realisation of the producers. Prices of steel in the international market are rising steeply.

Industry officials say even if the government levies an export duty of 10 per cent, the producers would end up having a net realisation since prices are rising fast. Steel prices in the last four months (Dec-Mar) have risen in the international market from an average of $300 per tonne to $900 per tonne. In comparison, prices in the domestic market have risen only by Rs 6,000 during the four months to the current range of Rs 33,000-34,000 ($950) per tonne.