Run-up to the Union Budget 2002-03: Steel

Background

India is the tenth largest producer of steel globally. The Indian steel industry, which had witnessed an average annual growth rate of around 18% during 1994-95 and 1995-96, has been in the grip of a slowdown in recent times.

Since 1996-97, the steel industry has been suffering from over-capacity. The recent move by the US to impose anti-dumping duty on Indian and other foreign steel companies has come as a blow for the beleaguered Indian steel industry. The US imports roughly 1.1 mn tonnes of steel from India.

Steel Production (‘000 tonnes)

Month	Steel Structurals	Bars and rods	HR coils/skelp	HR sheets	CR coils/sheets	GP/GC sheets	Finished steel
Apr-Dec 01	1,649	7,363	5,768	410	3,230	1,407	22,234
Apr-Dec 00	1,758	6,811	6,158	361	3,024	1,126	22,039
Change	-6.2%	8.1%	-6.3%	13.6%	6.8%	24.9%	0.9%

Source: Joint Plant Committee

Key Inputs
Iron Ore, Nickel Oxide, Alloyed and Unalloyed Nickel, Ferro Nickel, Power, Coal etc.

Products
Steel Structurals, Bars & Rods, HR Coils/Skelp, HR/CR Sheets & Coils, GP/GC Sheets, Finished Steel, etc

Duty Structure

	Excise		Customs (Basic)
	2000-01	2001-02	2000-01	2001-02
Products
HR Stainless Steel Slabs	16%	16%	25%	25%
HR Coils Seconds & Defectives	16%	16%	25%	35%
HR Coils Other than Seconds & Defectives	16%	16%	25%	25%
CR Coils	16%	16%	35%	35%
Stainless Steel Slabs	16%	16%	25%	25%
Inputs
Tin Mill Black Plate Coils (for mfr of tin plates only)	16%	16%	25%	25%
Coking Coal <12% ash	Nil	Nil	5%	5%
Coking Coal >12% ash	Nil	Nil	15%	15%
Metallurgical Coke Imported by mfr of pig iron or steel using blast furnace	Nil	Nil	15%	5%
Pig Iron	16%	16%	15%	15%
Ferro Alloys	16%	16%	25%	25%
HBI & Sponge Iron	16%	16%	25%	25%
Steel Melting Scrap	16%	16%	5%	5%
Ingots of Iron & Non Alloy Steel	16%	16%	25%	25%
Billets, Blooms < 0.6% Carbon	16%	16%	25%	25%
Nickel Oxide Sinter	16%	16%	5%	5%
Unwrought Nickel	16%	16%	5%	5%
Zinc	16%	16%	35%	35%
Ferro Nickel	16%	16%	5%	5%

Major announcements made in previous year's budget

• Concessional import duty of 5% for melting scrap extended to all units irrespective of the technology adopted for melting
• Customs duty on seconds and defective HR coils increased from 25% to 35%.

Industry's demands from Union Budget 2002-03

Some of the key demands made by industry associations such as CII, Cold Rolled Steel Manufacturers Association (CORSMA) etc are as follows:

• Supplies of Indian steel to projects / industries enjoying concessional duty under project import condition should be treated as deemed export so that the industry can avail of deemed export benefits.
• Basic Customs duty on the following critical inputs should be reduced to facilitate indigenous industry to become competitive.

No.	Item	Customs Duty	CII Proposal
		2000-01	2001-02
1	Limestone with silica content <0.69%	25%	5%
2	Non-coking coal with ash content <12% for metallurgical purposes	25%	5 %
3	Micro Silica / fume silica	35%	15 %
4	Graphite Electrode of size above 24inches	25%	5 %
5	Charge nickel	15%	5 %
6	Zinc	35%	25%

• Excise duty on galvanised sheets should be reduced from 16% to 8%.
• Concessional rate of 8% excise duty for GC sheets should be allowed, since these are used in low cost roofing and do not get Modvat benefit.

Key Players
Steel Authority of India, Essar Steel, Tata Iron and Steel, Jindal Iron & Steel, Jindal Vijaynagar Steels, Jindal Strips, Mahindra Ugine Steel, Mukand, Electrosteel Castings, Ispat Industries, Sesa Goa, Tata SSL.

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Run-Up To The Budget
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