Prices for plastics, cement and steel will drop
Worried about soaring input prices that could undermine its investment supply and also hurt the MSME sector, the government on Saturday imposed an export duty on some steel products, reduced import duties on some raw materials to steel and plastics, and sought to consolidate cement supply through better logistics.
It has notified that a 45% export duty will be imposed on iron ore pellets, while a 15% duty will be applied on a selection of pig iron, flat-rolled iron or steel unalloyed, bars and various flat-rolled products produced in stainless steel. Similarly, the current export duty on iron ores and concentrates will be raised from 30% to 50%. The import duty on coke and semi-coke will be removed from the current 5%. All these changes will be effective from May 22.
According to a notification from the Ministry of Finance, the basic customs duty on PCI coal and coking coal will be abolished (from 2.5%) and that on naphtha reduced to 1% from 2.5%. The duty on ferronickel will be reduced to zero and that on methyloxirane (propylene oxide), an input for plastics, reduced to just 2.5%.
High prices for critical inputs, particularly steel and cement, have threatened to inflate the costs of the government’s own projects in housing, roads and railways, in addition to weighing on private investment in infrastructure. The government has already budgeted a record capex of Rs 7.5 trillion for FY23, betting big on its multiplier effect to boost economic growth. Additionally, high steel and cement prices have long been a sore spot for consuming industries, especially manufacturers of engineered goods and real estate developers, among others.
“Steps are being taken to improve the availability of #cement and through better logistics to reduce the cost of cement,” Finance Minister Nirmala Sitharaman tweeted. “Similarly, we are calibrating tariffs on raw materials and intermediaries for iron and steel in order to reduce their prices. Import duties on certain steel raw materials will be reduced. Export duties on certain steel products will be levied,” she said.
Only the day before, Sitharaman had expressed concern over rising input costs despite India’s huge capacity to meet both domestic and export demand and called for the need to ensure that that there are no monopolistic or duopoly tendencies leading to higher prices and supply. lateral manipulations.
Saturday’s announcements come days after official data showed the Wholesale Price Index (WPI), dominated by raw materials and intermediate goods, hit a more than 30-year high of 15.08% in April. While WPI core inflation remained elevated at 11.1%, core retail inflation hit a near eight-year high of 6.97%.
Average monthly prices for hot rolled coil (HRC) – a benchmark for flat steel – may have declined by Rs 76,000 per tonne in April, but remain high at around Rs 72,500 in May, from Rs 66 000 in May 2021 and only Rs 35,900 in June 2020 when a Covid-induced lockdown was lifted, according to data from SteelMint. Similarly, according to the body of private property developers CREDAI, cement prices have climbed to around Rs 400 per bag from Rs 325 at the end of December 2021.
Industry leaders fear that cement and steel prices will rise further due to high coal prices. These two key inputs represent approximately 30% of the exit cost of real estate projects. Even the contractors of government projects, including the Pradhan Mantri Awas Yojana, or those of public entities like NHAI have started to search more for the projects they are carrying out.
India’s finished steel exports jumped 25% year-on-year in FY22 to 13.5 million tonnes. Steel imports, however, fell 1.7% to 4.69 million tonnes last year.
Sitharaman also tweeted: “We are also reducing tariffs on raw materials and intermediaries for plastic products where our import dependency is high. This will result in a reduction in the cost of the final products.