Govt may not restore steel sop

The finance and commerce ministries are unlikely to cede to the steel ministry and industry's demand for restoration on duty entitlement pass book (DEPB) scheme benefits.The DEPB benefit would be frozen from March 27.

Government officials told Business Standard that the DEPB rates, which is a duty neutralisation mechanism, need to reflect the reduction in excise and the customs duties.

"Besides, the domestic economy can't be left to the whims and fancies of a handful of manufacturers who are taking advantage of the higher international demand at the expense of the domesticmarket," an official said.

The steel ministry had proposed a freeze on DEPB for seven volatile items but in the wake of across the board reduction in customs and excise the government decided to stop the duty neutralisation benefit for all items.

In the recent past a large number of representations have been received from the steel ministry to restore the DEPB benefits for all but seven items.

Officials said that with the Election Commission putting in place the model code of conduct the government could not change decisions easily.

"There are lobbies working to restore part of the DEPB benefits and the moment we bring it back they will start diversion into international markets," an official added.

The sources said that the government had the option to either put an export duty, like in the US, to prevent diversion or ban exports. "In the liberalised regime, the government did not want to step in in this fashion so we decided to freeze DEPB benefits to discourage exports," said a source.

The stainless steel development association had earlier urged the ministry of steel to restore the DEPB benefits saying almost half of its production of stainless and special alloy steel amounting to Rs 4,000 crore annually was exported due to lack of domestic buyers.

On duty

• The DEPB rates, which is a duty neutralisation mechanism, need to reflect the reduction in excise and the customs duties, feels the government
• Officials feel the domestic economy can't be left to the whims and fancies of a handful of manufacturers, who are taking advantage of the higher international demand
• The steel ministry had proposed a freeze on DEPB for seven volatile items but in the wake of across the board reduction in Customs and excise the government decided to stop the duty neutralisation benefit for all items