Posted on 03 Mar 2015
Shares in
steelmakers mostly fell on Monday amid uncertainty whether the
government would raise import duties on the alloy and whether any
increase would be enough to protect the industry. Shares in Jindal Steel and
Power fell as much as 6.7 percent, while Tata Steel and JSW Steel also
underperformed the broader Nifty which rose 0.62 percent to close at a
record high. In Saturday's annual
budget, Finance Minister Arun Jaitley said the tariff rate on steel
imports would be increased to 15 percent from 10 percent, cheering
Indian producers which have been battered by cheap Chinese metal. However, Jaitley also said there would be "no change in the existing effective rates of basic customs duty on these goods". A
finance ministry official was not immediately available to clarify the
discrepancy, but companies themselves, optimistic earlier, said they
were now not pricing in any changes. "Since
there is no increase in import duty, it is our apprehension that the
surge in steel imports will continue unabated unless adequate measures
are taken," said H. Shivramkrishnan, chief commercial officer at Essar
Steel. As it stands, said a senior
executive at a different major domestic steelmaker, India's budget
suggests the government has simply paved the way to raise the import
duty up to 15 percent from 10 percent earlier without going to
parliament for approval, speeding up the process. That
is unlikely to be sufficient for Indian steel producers, which have
sought a tax hike, among other measures, to stem the flow of cheap
imports, as Russia and China ship out surplus output to global markets. "China
and Russia are still maintaining margins on the current rates so there
is a window for them to reduce further to balance out this 15 percent.
Hence, the duty should have been heavier," said independent consultant
Prakash Duvvuri. Almost all
companies making the alloy in India have urged the government to take
action against what they claim is "dumping" of cheaper steel, which has
pressured prices and hit profitability over the past few quarters. India
was the fourth-biggest market for Chinese steel last year, with imports
up 132 percent to 3.7 million tonnes, the biggest year-on-year increase
among China's top destinations, based on data compiled by UK steel
consultancy MEPS. JSW, Jindal Steel and Tata Steel did not respond to emails seeking comment.
