 "Kunal Bose")
The process of demystifying the Budget began some years ago, when the government would introduce new duties or revise rates whenever the need arose. Take steel. Delhi first announced a 20 per cent safeguard duty on hot-rolled coil in mid-September and then, much to the industry's relief, introduced in February minimum import prices of $341 and $752 a tonne on 173 products.
Why should the government wait for the Budget when the debilitating impact of import surges on domestic steel makers was already in evidence? The US administration's response to steel imports from China and Russia, with dollops of subsidy proving hurtful to local industry, is found to be much faster and effective than of either India or the European Union.
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Finance Minister Arun Jaitley has only partly met the aluminium industry's demand by raising the import duty on primary metal to 7.5 per cent from five per cent. The industry was hoping for a uniform import duty of 10 per cent on primary aluminium and scrap, which will continue to invite a small duty of 2.5 per cent. Even this small mercy was not expected, given the observation in the Economic Survey that raising the customs duty to curb imports of the silvery white metal might affect the "competitiveness of downstream sectors like power, transport and construction". The Survey, however, acknowledged the local industry's capacity use is now down to 50 per cent, against nearly 100 per cent in 2014-15. This has happened because the share of aluminium imports in the country's use of the metal is up sharply to 56.5 per cent in 2015-16 from 39.8 per cent in 2011-12.
Unfortunately for the industry, the government overlooked the fact that in the country's import of 1.563 million tonnes (mt) of aluminium in 2014-15, the share of scrap and waste was as much as 860,000 tonnes. By leaving the aluminium scrap import duty unchanged, the government has kept the door open for the large-scale imports, which converters are suspected to be using to make electricity conductor lines. These should ideally be made from primary aluminium to avoid power losses during transmission. The commerce ministry reportedly found merit in the industry's demand for a uniform duty on scrap and primary metal. At the current level of capacity use, the industry, which in recent years invested Rs 1.2 lakh crore to double smelting capacity to 4.2 mt, will continue to face difficult times.
Iron ore presented the challenge of striking a balance between the demand for conservation of a finite resource by steel makers and the compulsion to export fines, for which local demand is negligible, and low-grade lump ore. The proposal to extinguish the export duty on iron ore fines, now at 10 per cent, and a 30 per cent duty for lump ore with iron content below 58 per cent will not find critics. Earlier, recognising the regular plant closures, Delhi abolished the five per cent export duty on iron ore pellets. India's iron ore exports were down to five mt last year from 127 mt in 2011-12.
Much was expected of the Budget for the highly stressed farm sector, which fell victim to poor monsoon for consecutive years. The farm production growth rate was minus 0.2 per cent in 2014-15 and, this year, the growth forecast was a puny 1.1 per cent. The Survey, which expressed concern over the falling contribution of agriculture and allied sectors to the country's gross value added, gave sufficient hints that the Budget's principal focus would be the farm sector and welfare of growers.
With an ambitious target of doubling farmers' income in five years, Jaitley has made an allocation of Rs 9 lakh crore for agriculture credit, set a target of bringing 2.85 million hectares under irrigation to reduce crop output dependence on monsoon behaviour, expanded crop insurance coverage and proposed the launch of a unified agricultural market. Hopefully, effective implementation of these targets will herald the beginning of a new era for the farm sector.
The writer works at Metal Bulletin
