Not much cheer for metals industry

The metal industry’s expectations from the Budget had included a reduction in customs duties on raw materials, and an increase in those on finished products.

This was meant to make their products competitive against imports. The lack of such measures in the Budget disappointed the industry.

Steel: A few sops

The domestic steel industry is in a flux amidst the turmoil in global metals trade, reduced exports, softening prices, slowdown in the auto and infrastructure segments, and substantial debt in the balance-sheets of bigger players due to the acquisition of insolvent steel companies under the Insolvency and Bankruptcy Code (IBC).

The industry had hoped the Budget would bring in an import duty cut on its key raw material, coking coal, from about 5 per cent to nil. Indian steel companies imports most of their coking coal requirement since it is not available locally.

Also, the industry had sought an increase in the import duties on finished products to 12.5 per cent from the current 7.5-10 per cent. It has been concerned about increasing imports, especially after the tariff imposition by the US.

The import of steel at lower prices is making domestically manufactured steel less competitive.

Though the Budget did make a few announcements for the industry, such as a decrease in import duties on the raw materials used in electric steel and a rise in duty on semi-finished steel products, the changes will not benefit key players in a large way.

Electric steel, used in power transformers, is a very niche segment with only a few players and with limited production.

Similarly, semi-finished products account for only 8 per cent of the total steel imports. Its significant imports are flat products (65 per cent) followed by long products (13 per cent).

 

 

 

Thus, the customs duty benefits extended by the Budget to the steel industry are not far-reaching.

However, the boost for the affordable housing segment, and a proposed investment of ₹100-lakh crore in infrastructure in the next five years, are expected to give a leg-up to the sector indirectly.

Base metals: No change

In the aluminium industry, the scrap dealers (small players who import scrap, recycle and convert it into finished products) had anticipated a removal of import duties amid the rising cost of scrap globally.

However, the larger players had requested an increase in customs duties on scrap imports as the demand for aluminium is being met increasingly by recycled products.

Secondary aluminium retains the quality of the primary metal even after recycling and is available at a discounted price. This is reducing the demand for the products of the primary players in the country.

Meanwhile, the domestic copper industry, which is reeling under a supply pressure due to the shutdown of the Sterlite copper plant in Tamil Nadu (which was contributing nearly 40 per cent of the country’s output), had fervently hoped for a reduction of customs duty on copper ore imports.

Almost all the domestic copper players import the ore from countries such as Sri Lanka, Bhutan and Nepal, and process it into metal.

Copper ore imports from non-FTA (free trade agreement) countries attract a duty of 7.5 per cent while those from FTA countries are duty-free.

But, much to the dismay of the metal industries, no sops were announced. The Budget maintained the status quo for the industry.

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