Faced with a huge slump in domestic demand due to a surge in cheap imports, the Rs 15,000-crore ferro alloy industry has urged the government to impose a customs duty of 10 per cent, at least, to provide a level playing field. The present tariff is nil.
With 61 per cent capacity utilisation, the industry currently produces 2.22 million tonnes of ferro alloys. In a pre-Budget memorandum to the Ministry of Steel, the Mumbai-based Indian Ferro Alloy Producers Association has highlighted this demand, with the exception of ferro nickel, which is not produced in India and is entirely imported and where the import duty is nil. The recommendations argue that any measures applied to the steel industry get indiscriminately applied to ferro alloys, since the latter is a raw material of the former.
Hence, the ferro alloy industry should also be treated similarly to the steel industry, to provide a level playing field.
Higher import duty will also get the government more revenue, goes the argument.
The Association says electricity should also be supplied at an internationally competitive price, as the rate here is three to five times more as compared to that in other ferro alloy producing countries. Cost disadvantages like these enable imports to undercut domestic production, it complains. The memorandum says imports of ferro alloys have increased whenever basic customs duty was reduced.
The imports were Rs 263 crore when the duty was reduced from 25 per cent to 20 per cent in 2003-04, and increased to Rs 479.3 crore in 2004-05 when the duty was reduced to 15 per cent.
Again, imports surged to Rs 591.3 crore in 2005-06 when the duty was further reduced to 10 per cent. When it was reduced further to 7.5 per cent in 2006-07, it resulted in imports worth Rs 779.8 crore.
The following year, with a reduction to five per cent, imports were Rs 1,089.4 crore. Then, imports worth Rs 1,301.4 crore were recorded during April-December 2008, when the duty was removed entirely.
All this, says the Association, has meant an outgo of foreign exchange of Rs 4,504.2 crore in the past five years and nine months. The requirement could have been met from domestic production by utilising idle capacity, which would increase the revenue from indirect taxes like excise duty, sales tax, etc.
Source : Business Standard