Concerned that the rise in input prices could potentially lower its capex bid and hurt the MSME sector, the government on Saturday imposed export tariffs on certain steel products, reduced import duties on selected raw materials for steel and plastics and sought to raise them. Good supply of cement through logistics.
It has announced that 45% export duty will be levied on iron ore, where 15% will be selected flat-rolled products of pig iron, iron or non-alloy steel, bars and rods and various flat-rolled stainless steel products. Similarly, iron ore and centralized export duty will be increased from 30% to 50%. Coke and semi-Coke import duties will be abolished from the current 5%. All these changes will be effective from 22 May
According to a Finance Ministry notification, the basic tariff on PCI coal and coking coal will be abolished (from 2.5%) and on naphtha will be reduced from 2.5% to 1%. Tariffs on ferro-nickel will be reduced to zero and tariffs on an input methyloxyran (propylene oxide) for plastics will be reduced to only 2.5%.
Significant inputs, especially the high prices of steel and cement, in addition to the weight on private investment in infrastructure, have threatened to increase the cost of the government’s own projects in the housing, road and rail sectors. The government has already budgeted a record 7. 7.5 trillion for FY23, betting on its multiplier effect to stimulate economic growth. Moreover, the high cost of steel and cement has long been a painful issue for the consumer industry, especially for engineering materials manufacturers and realty developers.
Finance Minister Nirmala Sitharaman tweeted, “Measures are being taken through better logistics to improve the availability of #Cement and reduce the price of Cement.” “Similarly, we are setting tariffs to reduce the price of iron and steel raw materials and intermediaries. Import duty on some steel raw materials will be reduced. Some steel products will be subject to export duties, ”he said.
Just a day ago, Sitharaman expressed concern that despite India’s huge potential to meet both domestic and export demand, input costs are rising and called for ensuring that there is no monopolistic or bipolaristic trend that drives inflation and supply-side manipulation.
Saturday’s announcements come as official data shows that the Wholesale Price Index (WPI), influenced by raw materials and intermediate goods, reached a 30-year high of 15.08% in April. While core WPI inflation rose to 11.1%, core retail inflation reached an eight-year high of 6.97%.
The average monthly price of hot rolled coils (HRC) – a benchmark for flat steel – may drop from Rs 76,000 per tonne in April but they are still rising to around Rs 72,500 in May, Rs 66,000 in May 2021 and only Rs. 35,900 when a covid-induced lockdown was lifted in June 2020, still shows data from Stealmint. Similarly, according to CREDAI, a company of private realty developers, cement prices have risen from Rs 325 to around Rs 400 per bag by the end of December 2021.
Industry insiders fear that cement and steel prices could rise further due to higher coal prices. These two main input realities make up approximately 30% of the project’s output cost. Even government project contractors, including the Prime Minister’s Housing Scheme, or state-run entities such as the NHAI, have begun to look for more projects.
India’s finished steel exports increased by 25% year-on-year to 13.5 million tonnes in FY22 However, steel imports declined by 1.7% to 4.69 million tonnes in the last fiscal.
Sitharaman further tweeted: “Our import dependence is high where we are reducing tariffs on raw materials and intermediaries for plastic products. This will reduce the price of the final product. ”