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Export duty on steel dragging industry, may hurt capex more: Industry officials

Many officials Moneycontrol spoke to said steel prices were softening in the domestic market due to moderation in input prices, particularly coking coal, and a duty on exports at the time was not necessary.

August 04, 2022 / 04:25 PM IST
 
 
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The export duty on steel is weighing on domestic manufacturers and they may be forced to reconsider their capital expenditure if the government does not reconsider it, industry officials said.


Many officials Moneycontrol spoke to said steel prices were softening in the domestic market due to moderation in input prices, particularly coking coal, and a duty on exports at the time was not necessary.


ALSO READ: Duty-related measures to slash steel exports from India by 40% in FY23: CRISIL


“Imposition of export duty has got no correlation with the sliding prices of steel, the reduction in steel prices is the outcome of an international phenomenon, i.e., lower coking coal prices, a major contributor behind the fall in steel prices globally and not just India. But this development impacts the country’s export markets and also has a bearing on the capacity-building programme undertaken by the steel majors and further slows down the government vision of 300 million tonnes of steel production by 2030,” said Aruna Sharma, practitioner development economist and policy advisor, and ex-secretary, steel, to the government.


Sharma was speaking on ‘India’s steel demand and production outlook’ at a conference organised by SteelMint. The government had set a vision of 300 million tonnes of steel production by 2030 in the National Steel Policy in 2017.

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JSW Steel had while announcing its first-quarter results already announced a reduction in capex by Rs 5,000 crore to Rs 15,000 crore in the current fiscal. Tata Steel has left its capex planned unchanged.


Alok Sahay, secretary general, Indian Steel Association, said that the government’s decision on imposing export duty has created a sense of instability. He said during the conference that the government's move is a “double whammy” of sorts for the industry, implemented at a time when the prices of steel were down $100 per tonne from their peak.


Sahay said that the imposition of export duty on steel wasn’t an unwarranted measure by the government against its fight to curb inflation but it has ended up hurting steel production by 8-10 percent and impacted the country’s foreign exchange inflows.

On May 22, India announced an increase in the duty on exports of iron ore, from 30 percent to 50 percent, and imposed an export duty of up to 15 percent on some steel intermediaries. Prices have been falling since the imposition of the export duty and reached a level below Rs 60,000 per tonne in July against Rs 68,700 a tonne for the quarter ended June 30, 2021.

Nickey Mirchandani Assistant Editor at Moneycontrol covering Materials and Industrials space which includes Metals, Cement and Infrastructure sector. She’s a presenter and a stock market enthusiast with over 12 years of experience who loves reading between the lines and scanning through numbers. Before joining Moneycontrol, she was an Associate Research Head at Bloomberg Quint/ BQ Prime, where she wrote analytical pieces, anchored multiple interviews and a show called “ Market Wrap”.
first published: Aug 4, 2022 04:25 pm
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