Union Budget 2022-23: Announcements in import duties, coal cess waiver, reforms to tame prices expected in the steel sector

1 Feb 2022 , 07:30 AM

The year 2021 was fruitful for the steel industry on a global level. The sector witnessed a strong momentum and continued its upward pace aided by a recovery in consumption and a sharp uptick in prices. However, in recent times, the sector faced moderation in prices, largely attributable to a slowdown in Chinese steel production and resultantly sharp correction in global iron ore prices. Furthermore, volatile iron ore and coking coal prices ensured a gradual downward trend in global steel prices, keeping the prices elevated for a longer gestation period.

According to CARE Rating, on the domestic front, it is imperative that the demand-supply situation will remain favourable, which coupled with higher raw material prices and low exportable surplus from China will keep the steel prices at elevated levels, thereby impacting the end-users of the industry. The government is likely to adopt a balanced approach in taming steel prices with a slew of measures.

Here’s what CARE expects during the Budget for the sector:

The government may further cut import duties on certain steel products, which are detrimental to providing some respite to the Infrastructure and the MSME sectors.

Reduction in basic customs duty on raw materials like coking coal, ferronickel, iron, and stainless-steel scrap from the current 1% to nil.

Waiver of coal cess (currently Rs 400 per tonne) or refund to input tax credit on GST compensation for coal consumed for domestic steel sales.

Speedy implementation of PLI scheme of Rs 6,233 crore for specialty steel to help reduce imports.