Big steel makers have managed to manage coking coal price fluctuations, but the domestic merchant pig iron industry is reeling under losses. Sponge iron players, too, are dependent on imports.
“Since 2016, international coking coal prices have been highly volatile. Prices have zoomed 140 per cent since April 2016 whereas the corresponding rise in pig iron prices is only 46 per cent.
Coking coal has no substitute in steel making. Import duty of 2.5 per cent and GST compensation cess of Rs 400 per tonne is piling up burden for the producers”, an industry source said.
At 15 per cent, India's iron ore royalty is the steepest in the world. Brazil, the top producer, levies only two per cent. Australia, another large ore producer, has royalty on iron ore in the range of 5.35-7.5 per cent.
The domestic producers feel iron ore royalty in India needs to be lowered to 5-8 per cent to align with the competitive tax practices in other resource rich nations.
Imported scrap feeds 15 per cent of the domestic pig iron demand of 35 mt per annum. And, with scrap competing with pig iron, lower price scrap imports have unduly pressured the domestic players, resulting in shutdown of many units.
To tame the swelling scrap imports, the pig iron players have urged the Government to hike duty from 2.5 per cent to 10 per cent in 2019-20 Budget.
A review of Minimum Import Price (MIP) of scrap to align it with current domestic level and implementing BIS standards will also spell relief for the domestic makers, they suggested.