Duty-free export of steel items may get govt nod

NEW DELHI: The government plans to allow duty-free exports of steel products that are manufactured using imported inputs. The finance ministry has finalised a new scheme for the steel sector under which the export duty on value-added steel products would be withdrawn to the extent of imported raw material used in it.

The benefit would be applicable only for companies using advance licensing scheme (ALS) to avail duty-free imports of capital goods and other inputs. “The new scheme has been finalised by the department of revenue on the advise of the Committee of Secretaries (CoS) reviewing prices of essential commodities. The CoS would now examine the scheme at its next meeting before operationalising it,” an official source said.

The department of revenue has finalised the scheme only for flat steel products (hot and cold-rolled coils) and has suggested that it be operationalised when duty is re-imposed on flat steel products. Sources, however, said that the government may take a larger view of the entire issue and implement the scheme even for steel products that currently attract export duty. Earlier, the steel ministry also suggested exemption for all steel exports that used imported inputs.

While the government withdrew 5-15% export duty on flat steel products and galvanised steel, it has maintained 15% duty on long steel products (used in housing and construction activities), pig iron, sponge iron and semis like blooms, billets, plates and bars. Export duty is levied on these products even if uses imported inputs under the ALS scheme.
Under the new scheme, duty exemption would be extended only after the steel exporter/manufacturer gives an undertaking that the goods to be exported has been manufactured only from material imported under the ALS scheme. The ALS facilitates duty free imports of inputs and capital foods on a specified export obligation.

Companies would also have to maintain separate account for receipt and issue or utilisation of raw material for manufacture of steel products meant for exports. The commerce ministry would prescribe conditions that would have to be adhered for getting the duty exemption.

The changes are expected to improve domestic availability of steel products and reduce pressure on prices that has remained firm so far. Rising price of inputs like iron ore and coking coal is further putting pressure on steel companies to revise prices.

It is expected that domestic availability of various steel products could be improved by over 2.5 million tonnes if exports are undertaken only using imported material.