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Posted on Nov 29, 06:00PM | IBNS
With a view to revive the ailing steel industry and not allow the investment made go stranded, industry body ASSOCHAM has suggested exempting the iron ore import from Basic Custom Duty (BCD) and Countervailing Duty (CVD) as has been done in the case of coal.
In a note submitted to the government on Thursday, the chamber said "import of Finished Steel Products from FTA countries of South Korea, Japan and ASEAN, land at a high concessional duty rates into India as compared to normal duty rates from other countries. From 1st January 2013, these concessions would further increase resulting into many steel products turning cheaper and landing at 2.5pc import duty while some others would be imported with as low a duty rate as 1pc from South Korea".
This "Inverted" duty rate between finished steel and Iron ore is therefore denying an opportunity to steel sector for value addition. It will have a cascading effect on the economy putting at risk not only the huge funds invested by FIs and Bank but also large number of employment and also discourage future investment in this sector.
The chamber further said, the domestic steel production in the country is reeling through a rough phase due to non-availability of iron ore.
"The Supreme Court's decision to impose a production cap in the state of Karnataka and suspension of all mining activities in the state of Goa and additional regulatory measures being imposed by the State Governments and the Central Government like introduction of e-transit passes linked to royalty for regulating mineral movement in most of the mineral rich states, a tighter regulatory regime has been introduced to weed out all illegalities from the iron ore mining sector," said ASSOCHAM.
Under this regulatory regime the iron ore production is bound to remain stagnated for obvious reasons.
However, the Vision 2020 (Iron and Steel) document envisaged for the steel industry, projects a production capacity of 180 Million TPA by 2019-2020.
The industry has been growing at the stipulated rate but in recent past the growth has received a major jerk because of the recent shortage of iron ore.
Major Investment proposals including FDI of POSCO, Greenfield projects of Arcelor Mittal and that of major domestic players like JSW, TISCO have been halted because of non-assurance of committed supply of iron ore.
The export market is primarily dominated by Brazil and Australia.
The international FOB prices of iron ore is also fluctuating with demand and supply matrix in the international arena.
The prices were around USD 180 a few months back however recently being traded at USD 120. However, the prices are open to host of other fluctuations/risks like the ocean freight and the rupee dollar fluctuations.
Despite these risks some players are seriously scouting for long term agreements for their plants survival.
They have already imported cargo as test shipments and the cost of the imported cargo is exorbitantly high.
Some players are also resorting to acquisition of iron ore mining assets abroad which is throwing them to another basket of risk i.e. host country regulatory risk, like the Australian Government introducing Mining Taxes.
Even other mineral like coal, which though is abundantly available however the production is not much to meet the demand of the industry.
The Government of India has exempted the BCD and CVD on coal.