The Finance Ministry has hiked the import duty on key steel products by 2.5 per cent. This move, the second such hike after June 17, is aimed at protecting the domestic steel industry, as the yuan devaluation will make Chinese imports cheaper than Indian products.
Finance Minister Arun Jaitley tabled a notification related to the duty hike in both the Houses on Wednesday. The hike has come into effect immediately.
A senior Finance Ministry official said the import duty on semi ingots product will now be 10 per cent (from 7.5 per cent). Similarly, duty on stainless steel long products, alloy steel long products, non-alloy long products and alloy steel flat products has been raised to 10 per cent, from 7.5 per cent.
At the same time, non-alloy flat products and some specified alloy steel products will attract an import duty of 12.5 per cent. However, there is no change in the duty on CRGO (5 per cent) and stainless steel flat products (7.5 per cent). The products protected from duty hike are used in the manufacturing of power generation equipment and other machineries.
Steel imports up 71% Another senior official said as imports from China will be cheaper than Indian products, it will lead to more dumping and hurt the domestic industry. Steel imports shot up 71 per cent to 9.3 million tonnes in 2014-15 year-on-year, with almost a third of it from China, the largest steel producer, consumer and exporter of the commodity.
However, analysts believe that a 2.5 percentage point rise in import duty is not enough to revive the country’s ailing steel sector. A slowdown in economic growth of China dampened demand for steel in the country, causing it to export surplus steel at cheaper prices to countries such as India, hurting revenues of local steel manufacturers. The domestic manufacturers had to cut product prices several times over the past year.
Commenting on the decision, Kumar Kandaswami, Senior Director with Deloitte in India, said while increasing customs duty would be welcome by the steel producers, “most of the end-users like construction, infrastructure, engineering/fabrication and auto, accounting for about 90 per cent of steel consumption would probably feel there was a cost reduction opportunity. As these end-use sectors get back into the investment mode, the opposing interests have to be carefully balanced.”
Shares of most steel companies closed either with moderate gain or loss. The public sector Steel major SAIL ended the day at ₹58.15 with a very small gain of 0.17 per cent.
Similarly, Tata Steel bettered slightly and closed at ₹249.10 with a gain of less than one per cent. However, JSW Steel, Monnet Ispat & energy and Bhushan Steel ended in the red.