The Indian government in its union budget of 2022-23 has extended a steel scrap customs duty exemption for another year to support secondary steel producers. It also raised the country's capital expenditure, which is likely to boost steel demand.
The government last year reduced the customs duty imposed on ferrous scrap and waste imports to zero until 31 March 2022. The Material Recycling Association of India (MRAI) had proposed this extension in its pre-budget recommendation.
"The continuation of a duty exemption on the imports of steel scrap will provide a big boost to the local steel industry, especially the secondary steel manufacturers that largely depend on imported ferrous scrap as a key raw material," MRAI director Zain Nathani told Argus, adding that it will also benefit other industries in the micro, small and medium enterprise (MSME) sector that uses steel for finished products in various downstream applications such as infrastructure and auto components.
Secondary steel producers and MSMEs have been bearing the brunt of high input costs and demand destruction caused by the Covid-19 pandemic. About 60-65pc of the long steel produced in India is through the secondary route.
The extension of the steel scrap duty exemption will "drive the availability of scrap in the country and help mitigate the carbon footprint of steel sector", steelmaker Tata Steel chief executive and managing director TV Narendran said.
India's finance minister, Nirmala Sitharaman, also raised capital expenditure in the budget by 35.4pc to Rs7.5 trillion in 2022-23 from the current 5.54 trillion rupees ($74bn). This will be 2.9pc of the country's GDP.
The capex increase will "have a multiplier effect and provide impetus to drive growth, thus helping steel demand creation", Indian Steel Association president and AM/NS India chief executive Dilip Oommen said.
Steel demand will benefit from the capex increase that constitutes about 30pc of India's steel consumption, according to Crisil Research director Isha Chaudhary. "The rise was especially richer in steel-intensive segments such as railways and water [infrastructure]," Chaudhary said.
The government has announced plans to expand the national highway network by 25,000km in 2022-23 and said 400 new-generation Vande Bharat trains will be manufactured in the next three years, while allocating Rs600bn for domestic water project Har Ghar Nal Se Jal to cover 38mn households in the next fiscal year.
The finance minister also announced that certain anti-dumping and countervailing duties on stainless steel, coated steel flat products, bars of alloy steel and high-speed steel are being revoked to combat the metal's high prices.
