Border adjustment tax on imports, infra status for steel on the cards

Policy shift part of govt's atmanirbhar push

In an effort to cut import dependence and steer India’s steel sector towards self-reliance, the government is working on a policy in consultation with the industry.

It is examining border adjustment tax on imports and infra status for the sector, besides expanding the scope for the monitoring mechanism and introducing standards.

India is the second-largest steel producer and consumer in the world and the sector accounts for 2.3 per cent of the country’s GDP.

“India’s steel sector has the potential to become an export hub. The industry says non-creditable taxes and duties are hurting its competitiveness globally. There are suggestions, including cluster development with a supply chain ecosystem. We are examining those to formulate a policy,” said a government official.

Infrastructure and finance have been identified as the sector’s biggest constraints, followed by power, taxes, and duties on iron ore. All this adds to its cost disadvantage.

India has identified about 20 champion sectors, on which attention will be given. The focus is on producing quality products on a large scale for domestic consumption and export. 

Infra status for steel has emerged as a key demand in government-industry deliberations because it will help the sector get access to finance at competitive rates. 

The government is also considering a border adjustment tax (BAT)

A BAT is essentially taxing imports to create a level playing field for domestic producers. The industry is demanding that corresponding credit on BAT should be refunded on exports. Introducing standards set by the Bureau of Indian Standards on all steel products is also being examined.

“With domestic standards in place, inferior steel imports will get filtered,” said another official.

An offset policy also for capital goods and auto has also been recommended in line with that for defence, mandating 30 per cent domestic addition in India.

The government may set up empowered committees to expedite clearances for land, forest, environment, and infrastructure. Incidentally, Posco is taking a re-look at setting up a greenfield plant in India, about five years after it pulled out of Odisha over problems relating to land acquisition and mining laws. While China accounted for a fourth of indirectly traded steel exports in 2018, India’s share was 1.5 per cent. India is a net exporter of metal products, and a net importer in segments like machinery, electrical equipm­e­nt, domestic appliances, and other transport.

“As our biggest strengths, we have high grade iron ore, non-coking coal, and a skilled labour force. Yet, our capital goods sector is heavily dependent on steel imports, which range between 25 per cent and 75 per cent. We are identifying the bottlenecks,” said the official.