Budget 2024: Zero import duty on ferro-nickel to ease strain on stainless steel

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In a significant move to bolster the domestic steel industry, Finance Minister Nirmala Sitharaman has proposed to lift the import duty on ferro-nickel, a key raw material in the production of stainless steel.

The exemption of duty is expected to reduce the cost burden on steel manufacturers, enhance their global competitiveness, and potentially pass on the cost savings to customers.

For a long time, industry leader Jindal Stainless had been seeking a long-term waiver of duties on ferro-nickel and molybdenum to enhance the industry’s access to critical materials at competitive prices.

"We welcome exempting duties on ferro nickel the continuation of zero duty on ferrous scrap and pure nickel and that will help the domestic stainless steel industry and alloy steel industry to maintain its competitiveness," said Abhyuday Jindal, Managing director of Jindal Stainless.

Ferro-nickel is a key alloying agent in producing stainless steel due to its high nickel content, which enhances the steel's strength, toughness, and resistance to corrosion and oxidation.

"Steel and copper are important raw materials. To reduce their cost of production, I propose to remove the BCD (basic customs duty) on ferro-nickel and blister copper. I am also continuing with nil BCD on ferrous scrap and nickel cathode and concessional BCD of 2.5 percent on copper scrap," Sitharaman said in her Union Budget speech on July 23.

The customs duty on ferro-nickel has been slashed from 2.5 percent to zero, making it duty-free, while duty exemption on ferrous scrap has been extended to March 2026.

"The removal of basic customs duty on ferro-nickel should help in the cost of production for stainless steel, as raw material accounts for 70 percent of the total cost of sales and is the single largest cost component for stainless steel producers - and ferro-nickel is one of the key raw-materials for stainless steel, for which the industry is largely import-reliant due to lack of domestic availability. Therefore, the removal of the BCD should add to the respite," said Anubhav Kathuria, director of Synergy Steels.

This policy shift could potentially lead to a reduction in the prices of stainless steel products, benefiting various sectors, including construction, automotive, and consumer goods.

India primarily imports ferro-nickel from Indonesia, followed by Korea, Singapore, Switzerland, and Albania. In 2022, India was the fourth largest importer globally.

"Custom duty exemption on key inputs like ferro-nickel and blister copper would help in improving cost structures," said Amit Bhargava, partner and national head of mining and metals at KPMG.