Caught in a web

Calcutta, July 8: The steel industry is disappointed with the Union budget as it feels that P. Chidambaram has inflicted a “double attack” by increasing excise duty and reducing import duties further.

While the excise duty has been raised from 8 per cent to 12 per cent, the import duties have been cut from 15 per cent to 10 per cent.

According to industry watchers, there will be a sharp increase in steel prices, which will have a cascading impact on various other core sectors like construction and roads.

Essar Steel managing director Prashant Ruia said the fiscal measures on the steel industry is “an unfortunate step as this is the only core sector industry which has been singled out for such treatment”.

Ruia has also pointed out that the increase in excise duty on steel will fuel inflationary trend, especially in the projects and construction segment where steel is not modvatable.

Tata Steel expressed serious concern over the industry-specific proposals in the Union budget, saying it would hurt investments in the domestic steel sector, leading to a substantial import to meet growing demand.

“The increase in excise duty on steel by 4 per cent (from 8 per cent to 12 per cent), coupled with a reduction in customs duty from 15 to 10 per cent and abolition of about 5 per cent SAD will deter investments in the domestic industry while increasing import of steel to meet the growing demand in the country,” Tata Steel deputy managing director T. Mukherjee said here.

“The budget falls short of our expectations...In an era when steel demand is growing with high GDP growth and an emphasis on infrastructure, the steel sector needs support. But this has not been done,” Mukherjee said.

Mukherjee has also noted that the budget proposals would affect even exports of steel because of the negative steps.

Steel Authority of India (SAIL) chairman V. S. Jain, however, said the special packages for Bihar and northeast would boost up economic activities and that should have a positive spun off for the SAIL plants located in the eastern region.

SPS group managing director Bipin Vohra said it is a development budget for the rural sector, but has virtually nothing to offer to industry. The fiscal measures will put tremendous pressure on the margins. “Increasing prices is not the solution as there is always a limit beyond which it cannot be increased. After a long time, the domestic steel industry has been looking up, but these budget steps will further hinder the growth,” he said.

Steel Executive Federation of India’s chairman Brahma Mishra has termed the budget as unfortunate and uncalled for because it will hurt the entire industry and the employees.

Industry insiders feel that the steel prices (ex-plant) will shoot up by at least Rs 1500-2000 per tonne in the short term. Hence the ex-stockyard cost will be increased by more than Rs 3,500 per tonne.

Rashtriya Ispat Nigam Ltd (RINL) chairman B. K. Panda said there is no alternative to price rise because the market has to absorb the excise duty impact of the steel makers.