Steel firms see further duty cuts

MINI-BUDGET 2004

Though yesterday's duty cuts, announced by Finance Minister Jaswant Singh, is unlikely have an impact on steel prices, steel companies fear that the Customs duty on hot-rolled steel might be cut by another 5 per cent in the coming months to 15 per cent, if prices continue to go up.

The government yesterday reduced the peak rate of Customs duty from 25 per cent to 20 per cent. According to the Indian Steel Alliance (ISA) sources, a decision to this effect can be taken by the government after the Lok Sabha elections.

It is learnt that the Indian Steel Alliance has assured end-users that prices will not be raised for the next three months.

A meeting of ISA functionaries and end-users will take place on January 16.

It is worth noting that several proposals mooted by ISA to the Union steel ministry "" like rollback in peak Customs duty to 5 per cent, removal of the 4 per cent special additional duty, a 5 per cent reduction in the import duty on nickel and coal "" were met in yesterday's mini-Budget.

Reiterating that yesterday's duty cut would result in hot-rolled steel prices going down, steel makers pointed out that the global supply situation was tight and hot-rolled steel was not available at throwaway prices for imports.

On its turn, the Cold Rolled Steel Manufacturers Association of India (CORSMA) today wrote to finance minister Jaswant Singh demanding the import duty on hot-rolled coils be reduced to 10 per cent, citing a shortfall of 1 million tonnes in the availability of the commodity.

Expecting that the announcement would rein in the prices, CORSMA director SC Mathur said import of hot-rolled steel would increase by at least 5 per cent. Imports were expected to rise with a lag of three months, he said.

Meanwhile, Jindal Stainless Ltd, an OP Jindal Group company and the country's largest producer of stainless steel, today said the reduction in the import duty on nickel coupled with the removal of the 4 per cent special additional duty could improve its bottomline by up to Rs 20 crore per annum.

"After rising from $8000 per tonne to $15,000 per tonne, nickel prices seem to be stabilising now. Yesterday's duty cuts will help us become more competitive," Jindal Stainless director (finance) Arvind Parakh said.

At present, the country imports its entire requirement of nickel.

What next?

• Decision likely after the Lok Sabha elections
• Import of hot-rolled steel likely to increase by at least 5 per cent
• Indian Steel Alliance not to raise prices in the next three months
• Manufacturers and end-users to meet on January 16