Ferro alloys industry demands import duty hike

The country's Rs 5,000-crore ferro alloys industry has demanded a 2.5 per cent rise in import duty to fend off the possible dumping threat from China, Ukraine and South Africa.

In its pre-budget recommendation to the government, the Indian Ferro Alloy Producers' Association (IFAPA) told the government that despite utilising only 62 per cent capacity, the domestic industry produces around 3.25 million tonnes of ferro and noble alloys, running into overproduction. 

CAPACITY MATTERS Size of domestic industry, quantity in million tonnes in 2006-07
	Capacity	Production	Capacity utilisation (%)
Manganese alloys	1.96	1.08	55.10
Ferro Silicon	0.20	0.09	46.00
Chrome Alloys	1.06	0.80	75.56
Noble alloys	0.03	0.03	93.33
Total	3.25	2.00	61.57

If the pace of cut in import duty does not abate, the resultant dumping would lead to a huge outgo of foreign exchange and backwardness to the domestic industry.

In the last budget, the government had reduced the import duty on ferro alloys well below the World Trade Organisation's (WTO) recommended level of 7.5 per cent to 5 per cent.

Consequently, the import of noble alloys and ferro alloys, which are primarily used in the production of steel and stainless steel, will estimatedly jump 40 per cent to Rs 1,000 crore this financial year.

The reduction in custom duty has resulted in the opening the flood-gates for imports of ferro alloys.

Ferro alloy imports stood at Rs 263 crore, in terms of value, when the duty was reduced to 20 per cent from 25 per cent in 2003-04.

By 2006-07, the value of imports went past Rs 700 crore when the customs duty was 7.5 per cent. Thus, imports have increased by over 166 per cent in the last three years.

The entire stainless steel industry has to depend on the Orissa Mining Company (OMC) for chrome ore procurement.

Spotting an opportunity, the Ferro Alloys Corporation (Facor) is planning to set up 500,000 tonne stainless steel facility in Nagpur at an investment of Rs 1,250 crore.

Announcing its overall Rs 2,750 crore investment plan R K Saraf, CMD, Facor Group, said, "The purpose of this plant is to utilise the 140,000 tonnes of ferro chrome produced by Facor inhouse. Therefore, after three years, when this stainless steel plant goes on stream, Facor will no longer remain as a ferro chrome exporter," he added.

Saraf, also the president of IFAPA, said that in Wednesday's free trade regime, the import duty on ferro alloys may go up to zero per cent.

For the survival of the ferro alloys industry, IFAPA has also demanded zero import duty on metcoke with low ash (12 per cent) and phosphorus (0.01 per cent) content from 5 per cent.

Metcoke is not produced domestically and the country is dependent fully on imports.