The iron ore and steel industry has urged the government to abolish import duty and GST compensation cess on coking coal, a key and expensive requirement in iron smelting.
India doesn't have good quality coking coal deposits, leading pig iron and steel manufacturers to lean heavily on imports.
At the end of this financial year, the country's coking coal imports are pegged at 49.1 million tonnes--this corresponds to a share of 78 per cent of domestic consumption. India is projected to import 140.2 million tonnes (mt) by 2030- by then, the country's crude steel production is envisaged at 300 mt. The dependence on coking coal is set to fall to 65 per cent by 2030-31 as outlined in the National Steel Policy.
Big steel makers have managed to manage coking coal price fluctuations, but the domestic merchant pig iron industry is reeling under losses. Sponge iron players, too, are dependent on imports.
“Since 2016, international coking coal prices have been highly volatile. Prices have zoomed 140 per cent since April 2016 whereas the corresponding rise in pig iron prices is only 46 per cent.
Coking coal has no substitute in steel making. Import duty of 2.5 per cent and GST compensation cess of Rs 400 per tonne is piling up burden for the producers”, an industry source said.
The other key demand of the besieged producers in iron and steel industry is rationalizing royalty rates on iron ore, also a critical input alongside coking coal.
At 15 per cent, India's iron ore royalty is the steepest in the world. Brazil, the top producer, levies only two per cent. Australia, another large ore producer, has royalty on iron ore in the range of 5.35-7.5 per cent.
The domestic producers feel iron ore royalty in India needs to be lowered to 5-8 per cent to align with the competitive tax practices in other resource rich nations.
Besides coking coal price pressures, the pig iron ore makers have also been roiled by rising stream of scrap imports. Between FY17 and FY19, scrap imports have grown by nine per cent, leading to forex outgo of $1.77 billion (till February 2019).
Imported scrap feeds 15 per cent of the domestic pig iron demand of 35 mt per annum. And, with scrap competing with pig iron, lower price scrap imports have unduly pressured the domestic players, resulting in shutdown of many units.
To tame the swelling scrap imports, the pig iron players have urged the Government to hike duty from 2.5 per cent to 10 per cent in 2019-20 Budget.
A review of Minimum Import Price (MIP) of scrap to align it with current domestic level and implementing BIS standards will also spell relief for the domestic makers, they suggested.