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Government impose 15% excise duty on Steel Products


After a long engagement of conflict with the steel makers, the UPA government decided to mull 15 percent export duty on different steel products in a bit to slash down the rising prices of alloy. But various steel items or/and products like bars, rods, pig iron, mild steel products are kept exempted from custom duty. It has been cut down from 5% to nil.

Steel plays a pivotal role in India's infrastructure. But from the last one year, steel prices have increased to 49%. Steel giants 'Sail' and 'Tata' have started introducing surcharge of Rs. 5000 on their raw material to counter with their increasing input cost. On the part of the discussions for the Finance Bill 2008-09, the finance minister Mr. P Chidambaram declared out the 15% imposition of export duty on semi finished steel items and and 5% duty on galvanized sheets, to curb down the increasing gap between domestic demand and supply which in turns making steel products costlier for varied commercial purposes. Earlier an inter-ministerial group was formed for finding out the measures of checking steel cost, which is contributing to nearly 21.3% in current inflation. The group formed suggested a hike in steel export duty to 10% and iron ore to 15%. Various fiscal methods were discussed in length by steel minister Mr. Ram Vilas Paswan, commerce and industry minister Mr. Kamal Nath and mines minister Mr. Sis Ram Ola to check out upward spiraling steel prices. The proposed report was submitted to the prime minister Mr. Manmohan Singh before the cabinet committee meeting, which was schedule to be taken place for discussing measures of bringing down the soaring inflation rate. The proposal was already approved by the finance minister Mr. P Chidambaram who is the biggest advocate of developing revenue-neutral scheme for offsetting losses to the foreign exchequer which would arise due to levy of export duty. The UPA government is also aimed to escalate the minerals royalty including of iron ores. It is planning to increase iron ore royalty from the current rate of Rs 4 - Rs 27 per tonne, accordingly to the iron content, to 10% of sale price on the basis of ad-valorem.

Steeping towards checking the high steel price rate, the government here decided to impose 15 percent export duty on different steel products. It will included all those steel materials which are used for constructional usages. Besides flat items, there has been a shortage of big steel products also and it was mooted as a big question for finance minister. To bridge the gap of shortage, government has mulled 15 percent export duty on all products i.e, flat and long like rods, sheets etc. Reiterated on stabilizing rising steel prices, finance minister has decided to completely write off custom duty on various steel making products like ferro alloys and zinc, metcoke and disposed off countervailing duty on construction items such as TMT bars.

The surge of steel prices in global arena forced the government to make a rise in export rate. The iron ore prices are showing a rising trend which has now gone up from $110 per tonne to $150 per tonne. The new export rate imposed by the government will make the indian miners to pay between Rs. 450 to Rs. 600 per tonne. But it is said that the current rate was based on the $70 per tonne of iron ore, which was prevailing in previous year. But from the last year till now prices have doubled to a manifold therefore some people even from government side considered it be an inadequate.

Mining leaseholders pay royalty on minerals to state governments. According to the provisions made in the 'Mines and Mineral (Development & Regulation) Act 1957, the royalty rate can be increased once during three years. As it was earlier revised on 14th October, 2004. So, the next revision is due till current date.

The government move has evoked mixed responses from indian steel industry. Where on one side it is seen as a step for increasing steel availability in domestic market but on the other hand, it is taken as a measure which could poorly affect India's competitiveness on the global platform. The steel makers are needed to meet obligations under the Export Promotion Credit Guarantee (EPCG) scheme. Therefore, such methodologies from finance ministry could put down country's steel industry into dump and lead to disincentive. The user industries are taking it as an inclusive step in bringing down metal price in domestic sector. But the steel makers are seeing it as a counterproductive measure that will prove to be futile in long run.