The move will bring some relief to manufacturing industries such as automotive, consumer electronics and construction, where high steel prices have squeezed business margins and hurt consumer demand due to rising prices.
However, the move may not be thrilling steelmakers who tend to make higher margins on exported steel.
“This (export) duty will have an impact on steel exports,” a senior steel industry official said. About 15% of the flat steel produced in India is exported. A 15% export duty on flat steel will make Indian steel more expensive abroad, forcing steelmakers to sell more locally.
The government has levied a 15% export duty on several steel intermediates like flat-rolled steel and bars and rods, which are consumed by the manufacturing industry. Iron ore will be subject to a 50% export duty. Meanwhile, import duties on inputs for the steel industry such as coke, coal and ferronickel were reduced to zero.
The government expects this to reduce the price of domestic steel and improve its availability in the local market.
Manufacturers lamented the runaway inflation in steel prices over the past year. For example, RC Bhargava, the chairman of the country’s largest automaker
said high input costs were one of the reasons cars were expensive, shutting many consumers out of the market.
The small car market, which is the “bread and butter” of
was shrinking and the “butter” of the segment was gone with only bread, he said on Friday.
Meanwhile, steelmakers have benefited from the high cycle in commodity prices over the past year. Steel companies have taken advantage of the “supercycle” to repair their heavily leveraged balance sheets and invest in capacity expansion.