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Indian steel producers seek rollback of import duty on coking coal

22nd July 2014

By: Ajoy K Das

Creamer Media Correspondent

  

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KOLKATA (miningweekly.com) - Indian steel producers were imploring the government to roll back the 2.5% duty imposed on imported coking coal.

Leading domestic steel companies would make a concerted effort to approach the federal Finance Ministry seeking a scrapping of the duty on the grounds that the country lacked coking coal resources and that steel producers had a high import dependency for this critical raw material.

The lobbying would be undertaken through leading chambers of commerce such as the Federation of Indian Chambers of Commerce and Industry and the Associated Chamber of Commerce and Industry.

The Indian government increased import duty on coking coal from nil to 2.5% in the federal Budget presented before the Indian Parliament earlier this month.

In a presentation being readied for the Finance Ministry, steel companies contended that the higher duty would increase the cost of production by Rs200 ($3) per tonne and impede the growth of the industry, which was targeting steel production of 300-million tonnes a year by 2025, up from around 100-million tonnes a year at present.

It was pointed out by the industry, that local steel companies were compelled to import coking coal, shipping in about 32-million tonnes during 2013/14. This was forecast to increase to 120-million tonnes a year within the next ten years.

Given this trend, the import duty would erode cost competitiveness of domestically produced steel and open the market for dependency on imported steel products, the industry claimed.

The presentation noted that the present high coking coal import dependency of steel companies was unlikely to change even in the long term and India would continue to be the third-largest importer given domestic constraints in increasing production of coking coal to match growth in steel production.

Bharat Coking Coal Limited (BCCL), a wholly-owned subsidiary of Coal India Limited, was the sole domestic producer of coking coal, accounting for supply of around 30-million tonnes a year. Moreover, despite the inherent shortage of the resource in the country, BCCL had set a target of increasing production by just 10-million tonnes a year by 2017, and another 10-million tonnes a year by 2020, deepening the reliance on imports over the next few years.

The steel companies were also expected to convey to the government that the customs duty impost defied logic as it was the latter’s avowed policy to promote use of low-grade iron-ore by steel mills and reduce the dominant use of high-grade iron-ore (iron content 63.5% and above) to ensure resource conservation.

It was commonly accepted by steel producers that low-grade iron-ore with high silica and alumina content required higher heat generation in blast furnaces and hence the higher requirement for coking coal.

Most steel companies were now being forced to use low-grade iron-ore following shortages in the domestic market and, hence, projections of coking coal demand and imports would increase.

According to the Indian Bureau of Mines, use of high-grade iron-ore increased productivity by 2% while reducing coking coal requirements by 1%.

Edited by Esmarie Iannucci
Creamer Media Senior Deputy Editor: Australasia

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