Contests industry’s claim on quantum of orders backed by letters of credit
The Ministry of Steel has contested the industry’s claim on the quantum of pre-contracted orders to be exempted from fresh export duty even as it agrees on the need for relief.
On May 21, the Government levied an export duty of 15 per cent on finished steel products and pellets to improve domestic availability and rein in prices.
For the raw material iron ore with ferrous content of 58 per cent and above, the Government increased export duty from 30 per cent to 50 per cent, virtually bringing shipments to a standstill.
The Ministry of Steel received representations from domestic players including Indian Steel Association, Jindal Stainless, Indian Stainless Steel Development Association, and Material Recycling Association of India for exemption of export duty for existing orders and contracts, according to an office memorandum to the Secretary of Commerce and Director General of Foreign Trade.
The steel ministry felt that the industry’s concerns were justified in cases where the irrevocable commercial letters of credit were already opened and these may be considered favourably.
The memorandum said it has learnt from the industry that there were export orders for about two million tonnes of steel or iron ore pellets where letters of credit were established, or sales contracts executed prior to the notification of fresh export duty.
However, it said, on examination only orders for 541,940 tonnes of steel and iron ore pellets were found to have letters of credit.
Earlier, major steel companies had written to Finance Minister Nirmala Sitharaman for the withdrawal of export duty on iron and steel intermediates.
The association said the “sudden” imposition of duty on a wide range of steel products would bring exports to a halt.
An ICRA report said that almost 95 per cent of India’s finished steel export basket had been hit by the 15 per cent export duty, and domestic steel prices could potentially fall by 10-15 per cent in the coming months as demand enters the seasonally weak monsoon quarter.
Steel prices contracted for this month have crashed to ₹64,000 a tonne from ₹71,000 last month on expectation of a supply glut. Prices were hovering at ₹76,000 a tonne in April. Interestingly, the excess supply comes amid forecast of weak demand with the onset of southwest monsoon slowing down infrastructure activities from this month.