The Telegraph
Since 1st March, 1999
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Steel eyes infrastructure demand upsurge

Calcutta, Feb. 28: The domestic steel sector has expressed happiness over the maiden budget of Union finance minister Jaswant Singh.

For the first time in five years, the steel industry has received a shot in the arm with several sectors, including auto and infrastructure, getting sops from the government.

Industry chieftains said the government’s decision to make sizeable investments in the infrastructure sector would lead to a heavy demand for steel and cement. Besides, the budget proposals have come at a time when the steel industry has been coming out of a steep five-year-old recession.4

“This is a growth-oriented budget with substantial investments earmarked for infrastructure sectors involving construction of roads, railways, seaports and airports. This is a welcome step and will boost the domestic demand for steel, helping the steel sector, which is still saddled with additional capacity,” said V.S. Jain, chairman, Steel Authority of India Ltd.

The reduction of peak customs duty on a range of finished steel products may be a dampener for the Indian steel industry, especially in view of a number of countries still continuing with strong protective measures favouring their domestic steel industries, said Jain.

“However, as these domestic steel prices compare favourably with reference to import parity prices, we do not foresee any adverse impact for the time being,” added the SAIL chairman.

Jain also pointed out that the direct impact of this budget on SAIL is marginal at around Rs 10 crore, mainly on account of increases in service tax and customs duty on nickel, metallurgical coke, diesel and other items.

Tata Steel managing director B. Muthuraman has viewed the budget as an effort by the government to make the country globally competitive in steel-making.

“The Indian steel industry is already globally competitive from an operation point of view and measures to improve infrastructure will further improve competitiveness. The emphasis on housing, roads, ports and airport are going to further increase the domestic demand for steel.

For Tata Steel, the best thing has come in the form of a reduction in excise duties in the auto sector. The company is likely to make huge profits once this sector looks up, as it is the only supplier of auto grade steel. Muthuraman noted that the reduction in the import duty of metallurgical coke by 5 per cent would be beneficial for the steel industry.

Essar Steel director J. Mehra said the retention of import duty on finished steel would enable producers to face the onslaught of dumped imports. “The facility of allowing (payment of) excise duty on a monthly basis, instead of a fortnightly basis, would benefit the cash flow,” he said.

Mehra also said the integrated steel producers are unhappy over the new practice of including the transportation and depot charges in the calculation of excise duty, instead of the earlier practice of charging it at factory prices. “Moreover, the increase in excise duty on met coke will also add to the cost of steel making,” he said.

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