KOLKATA (miningweekly.com) - Indian industry representative body, the Associated Chamber of Commerce and Industry (Assocham), has approached the Finance Ministry in an effort to correct the inverted import duty structure in the steel industry, where raw materials were attracting a higher rate than finished product.
In a communication to the Finance Ministry, Assocham sought complete exemption from import duty on iron-ore to mirror the scenario enjoyed by other commodities, such as coal.
“Import of finished steel products into India from South Korea, Japan and other countries from the ASEAN region were levied a high concessional rate of duty, making these steel products cheaper and pushing the domestic sector into peril,” the communication to the Ministry read.
The inverted duty rate was denying the steel sector opportunities for greater value addition, apart from risking huge funds invested by various banks and financial institutions in steel-producing companies, the communication said.
The current duties on imported iron-ore lumps and concentrates, including roasted iron pyrites, were 2.5% basic duty, 12% countervailing duty (CVD) and 4% special CVD.
Under a Free Trade Agreement with South Korea and Japan, steel imports from these countries were permitted at an import duty of 3.3%, while imports from other countries attracted a duty of 7.5%.
“The Indian steel sector has been growing at the anticipated rate but in the recent past it has received major blows because of shortages of iron-ore and, as a fall-out, major investment proposals from leading domestic and global steel players have come to a halt owing to non-assurance of committed supply of iron-ore,” the Assocham communication said.
Assocham has also noted that Indian steel companies were being forced to acquire iron-ore assets overseas owing to domestic shortages, bringing with it the need to comply with the regulatory risks of host countries.
However, the Indian government had previously denied any shortage of iron-ore for domestic steel producers. The government pointed out that Indian steel production was about 67-million to 70-million tons a year and, with 1.6-million tons of ore required for producing one ton of steel, current levels of iron-ore production of around 167-million tons indicated no dearth of raw material.
Indian imports of iron-ore during April 2012 and January 2013 were estimated at eight-million tons and forecast to grow to levels of between 17-million and 19-million tons over the next fiscal year.
However, industry analysts and officials in steel-producing companies said that while the government’s contention could not be disputed, it reflected the current demand-supply dynamics of raw materials and did not factor in future investments and capacity creation.
The reality was that iron-ore linkages to new steel production capacities were being denied on several grounds and, in the absence of any future raw material security strategic investment, planning for new steel mills had come to a halt, the officials said.