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Sources close to the Finance Ministry told CNBC-TV18 that Steel export duties are part of the Parliament approved Finance bill and had to be notified. The sources also revealed that exemption notification is needed to withdraw duties.
The Steel Ministry has pulled up
The Finance Minister has added a fresh twist to the battle between the government and steel producers. Just a few days after agreeing to a steel price cut, producers are crying foul over the imposition of export duties. The promised cut may be reversed.
Just when we thought the imbroglio over steel prices was over, the sector is in the midst of a fresh controversy. The government has notified an export duty of up to 15% and steel producers are crying foul. They claim, in their meeting with the PM last week, they were virtually given an assurance, that export duty would not be levied if producers agreed to a price cut. A Rs 4,000 reduction was announced the same day and now steel producers want the government to live up to its end of the deal. Steel secretary R S Pandey says the notification was necessary as per law, as this was part of the finance bill and had received Presidential nod.
“Major producers had met the Prime Minister recently and had submitted a list of demands. One such demand includes a review of the decision to impose export taxes on steel products. That is under serious examination and a view would emerge very quickly,” said RS Pandey, Steel Secretary.
Of the major steel producers SAIL, TISCO, Ispat and Essar had cut prices with immediate effect on the May 7. Sources in the steel industry say, there is speculation that if the government does not reverse the export duty notification, they could look at reversing their promised price cut.
“As a major steel buyer, its a great shock to us, especially the duty on pipes,” said Indresh Batra, MD, Jindal SAW.
The timing of the notification raises a few issues. Perhaps the Finance Ministry was not taken in by the assurance of the steel producers. The Finance Minister may have also wanted to be seen as doing every little bit to fight inflation. Export duties will also help make up for some of the revenue loss caused by import and excise duty cuts. The steel ministry is keen on withdrawing the export tax, but that would require cabinet approval. A quick reversal is unlikely.
Earlier in the day, Steel secretary R S Pandey told CNBC-TV18 that the final decision on export duty would be announced soon. He said the government was seriously reviewing export duty on steel products at around 5%, 10%, or 15%. "This export duty was under negotiation but nothing is final yet."
According to Pandey, other demands apart from export duty are also under consideration.
Excerpts from CNBC-TV18’s exclusive interview with RS Pandey:
Q: Can you confirm for us whether or not the notification has been issued and what is the quantum of export duty now?
A: The Revenue Department told us that it was a technical necessity after having got the President’s assent on the bill, which was passed by Parliament. It had to be notified. Major producers had met the Prime Minister recently and had submitted a list of demands. One such demand includes a review of the decision to impose export taxes on steel products. That is under serious examination and a view would emerge very quickly.
Q: That is the point because the takeaway from last week seems to be that after the cut in steel prices, this export duty would not go through. Are you saying that with the notification it is still not a done deal and this is still open to negotiation in terms of the export duty that has been hiked?
A: We have earlier clarified that when the price cut was announced, there was no condition along with the price cut. There was a list of demands and one such demand is about export taxes. So, that is under serious examination.
Q: What is the quantum of the rate increase, if it goes through, for HR coils and cold rolled?
A: 16%, 10% and 5-10 for different categories of products.
Q: Have you received any communication yet from the steel producers on what is happening with this export duty notification and how soon can they approach you for some kind of dialogue?
A: The notification has been issued. That is what we have been told by the Revenue Department. Today, the offices have just opened, so the notification will be out.
Q: The other demands that were laid out include going in for a steel price hike, and ad valorem duty on iron ore. Is there something that the steel ministry is working on at this point of time to kind of bring down cost for these steel manufacturers, because there is clearly pressure on that front?
A: There are quite a few other demands and all these demands are under considerations.
Q: Is there likely to be some consideration on these demands, or when could we expect an announcement to that effect?
A: I cannot give you a definite timeframe because some demand would require inter-ministerial considerations, but all the demands are under considerations.
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