Budget 2020: Stainless steel sector seeks zero duty on ferro-nickel, scrap

Ahead of the budget, stainless steel players have sought some curative measures like removal of import duty on key raw materials ferro-nickel and stainless steel scrap.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget for FY2020-21 on February 1.

In order to augment domestic manufacturing, the Indian Stainless Steel Development Association (ISSDA) said it has recommended some curative measures to the government ahead of the budget.

In a representation submitted to the finance ministry, the body has sought nil duty on import of key raw materials like ferro-nickel and stainless-steel scrap, it said.

"Ferro-nickel and stainless steel scrap are key raw materials which are not available in the country and must necessarily be imported," it said.

At present, the basic customs duty on ferro-nickel and stainless steel scrap is 2.5 per cent.

Removal of duty on ferro-nickel and stainless steel scrap is a long standing demand and the Ministry of Steel has also at times batted for zero duty on these items.

The stainless steel industry meets the bulk of its nickel requirements through ferro-nickel and stainless steel scrap route.

"The non-availability of ferro-nickel within the country makes it necessary for domestic stainless steel producers to import this ferro alloy. This is because India is deficient in nickel ore and therefore there is no production on ferro-nickel within the country.

The bulk of the ferro-nickel procurement is from non-FTA countries. Even within the FTA countries, nil rate of duty is applicable only to imports from ASEAN countries.

Further, FTA partner countries like Japan and Korea are themselves net importers of ferro-nickel given their substantial stainless steel manufacturing capacities. Reduction of basic customs duty (BCD) on ferro nickel will not harm any domestic industry," said.

For stainless steel scrap, it said, its availability in the country is extremely limited and bulk of the stainless steel scrap requirement has to be compulsorily imported.

Almost 75 per cent of the stainless steel scrap requirement in the country has to be met through imports.

Stainless steel, owing to its corrosion resistant characteristic and high strength, has an extremely long life span -- at least 30 years -- as compared to any other substitute material. Most of the growth in stainless steel consumption, the ISSDA said, in the country has come about in the last 10-12 years.

It also pointed out that "major stainless steel producing countries like China, Korea, Japan, the EU and USA have zero import duties on stainless steel scrap. From ASEAN and FTA (Japan, Korea) countries while the stainless steel flat products are coming at zero duty, the most essential raw material stainless steel attracts 2.5 per cent duty."

ISSDA President K K Pahuja, said, It is necessary to boost domestic manufacturing by reducing high input costs.

Despite the brimming global trade challenges, he said, India continues to be the second largest producer and consumer of stainless steel. The demand for stainless steel in India is growing at a compound annual growth rate (CAGR) of 8-9 per cent across an array of applications. However, Indian per capita consumption of stainless steel is 2.5 kg against the world average of 6 kg.

"Moreover, the capacity utilization of the Indian stainless steel manufacturers is stagnant at 60-70 per cent as cheap imports engulf a significant market share. Further, high input costs reduce the competitiveness of domestic players globally. We urge the government to not see the duty on raw materials as a revenue source, rather consider the larger vision of higher manufacturing growth resulting in job creation," he said.

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