Budget 2023: No big-bang announcements expected for metals

Steel

With the export duty on steel and related raw materials rolled back in November, the Budget 2023-24 may not offer any big-bang announcements for the metals sector, say industry analysts.

Clarity on ‘green steel’, increased infrastructure spending and the push for electric mobility are the themes to ‘watch out’ for, say the experts.

“Reduction in duties such as clean energy cess, customs duty on import of raw materials or royalties applicable on mining is always what metal companies hope for from budget announcements as it means a further cost reduction. However (post the rollback of the export duty), any further changes in the tax and duty structure for metal companies looks unlikely,” said Hitesh Avachat, associate director, CareEdge Ratings.

Last May, in an attempt to rein in inflation, the central government imposed an export duty on certain steel products and related raw materials. This was rolled back in November bringing respite to domestic steel manufacturers.

IBM formula, infrastructure spending, electric mobility

Satnam Singh, director-consulting, CRISIL Market Intelligence & Analytics, said companies would expect a reduction in different duties and cess, but that may not be on the government's agenda.

Singh, however, added, “Clarity on the Indian Bureau of Mines (IBM) pricing formula has been an industry demand for a while. One can expect further traction on it either in the upcoming budget or eventually.” Industry representations have been made to streamline the exclusion of levies and duties from the IBM formula used to calculate the average selling price of iron ore. This price is used to further calculate royalties payable by captive miners.

Metal companies, analysts said, should also watch out for announcements related to infrastructure spending, a scrappage policy and electric mobility, which could bring indirect gains through increased demand and lower costs.

“Increased spending on electric vehicles will be positive for steel and aluminium. Positive changes in the scrappage policy would be a positive for secondary steel makers, as it will increase the availability and reduce the cost of raw materials for that segment,” CareEdge’s Avachat pointed out.

Green clarity awaited

Industry watchers will also look out for policy or scheme announcements related to decarbonisation. Steel manufacturing is counted among industries that are the highest emitters of carbon dioxide (CO2).

“The budget could provide a good opportunity to announce policies or schemes around green steel, starting with defining green steel in the Indian context,” said CRISIL’s Singh. Green steel is broadly defined as steel produced without the use of fossil fuel.

Singh added that more clarity on what energy generation and manufacturing processes will be considered green in the Indian context is needed. “We will need to see if this happens in this budget or the next,” he added. India has committed to achieve its net-zero emissions target by the year 2070.