Punjab steel makers facing tax brunt

Mandi Gobindgarh, the steel cluster of Punjab is rusting. About 350 small and medium units in the town are languishing due to excessive tax burden coupled with the frequent revision of steel prices.

Despite a spurt in demand due to growth in housing and infrastructure, the industry has been marginalised due to non-availability of raw material and taxes imposed by the state government.

According to the chairman of Modern Steel, an important player in Mandi Gobindgarh, most of the units in Mandi Gobindgarh rely on steel scrap that is imported.

The state government imposed an entry tax of 4 per cent on all goods brought in the state. This is against the spirit of the constitution.

He said that this was violation of the article 286 of the constitution that says that no state can impose tax on purchase of any good imported from outside India. The units also pay 4 per cent VAT that they said should be slashed to 2 per cent.

The revision of steel scrap by $150 to $200 per MT in the last three months hit bottomlines hard.

There are about 300 steel re-rolling mills and about 70 induction furnaces in the town and most of them are operating on sub-optimal capacity.

In the past few months, about a dozen players from Mandi shifted near the source of iron and coal in the eastern part of India and the consistent revision of price would make most of the units unviable, said another factory owner.

Ravi Kant Sharma of R K Steel and Alloys said that there has been a burgeoning demand for TMT steel in Punjab due to rise in construction activity.

"Due to the trend of setting up shopping malls, multiplexes and marriage palaces in big and small towns of Punjab, the demand for TMT steel has increased manifold in the region. Unfortunately, we have not been able to cash in on it because of the adverse scenario prevalent in the state. The raw material (ingot and sponge iron) is available at an unviable prices and an acute shortage of power comes as the last straw in the camel's back.

He added that they get erratic power supply five days a week and captive power makes the business non-viable.

The entrepreneurs expect some relief in the budget to be presented by the Punjab Finance Minister Manpreet Singh Badal in the next week as the elimination of steel industry in Punjab would make a dent on revenue and employment in the state's economy.