Ahead of the Union Budget, industry body FICCI has requested the government to reduce the basic customs duty (BCD) on ferronickel to zero and levy a higher duty of 12.5 per cent on the import of stainless steel flat products. Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget for FY2022-23 on February 1, 2022.

In its budget recommendations, the Federation of Indian Chambers of Commerce and Industry (FFICI) has also urged the government to continue with zero duty on stainless steel scrap after March 31, 2022. At present, while the BCD on ferronickel is 2.5 per cent, the same on stainless steel flat products is 7.5 per cent. On stainless steel scrap, zero customs duty is applicable up to March 31, 2022.

Putting its case for zero duty on ferronickel, Ficci said it is the most important raw material used in stainless steel making. The stainless steel industry meets the bulk of its nickel requirements through ferronickel and stainless-steel scrap routes, as pure nickel is very expensive.

Due to the non-availability of ferronickel in the country, domestic stainless steel producers are forced to import it from countries like Japan, South Korea and Greece. This is because India is deficient in nickel ore, and therefore, there is no production of ferronickel within the country.

Besides, no customs duty is not applicable on ferronickel originating from Indonesia and Japan due to India-ASEAN FTA and India-Japan CEPA. On imposing a higher duty on stainless steel flat products, the body said, “There is a need for rationalizing these duties due to the various reasons”.

According to Ficci, imports of stainless steel flat products have been rising over the last few months. From a monthly average of 34,105 tonnes in 2020-21, imports grew by an overwhelming 127 per cent to 77,337 tonnes in July 2021. These high imports are hurting the domestic industry, which has the capacity and capability to meet the entire domestic demand. There is no need to depend on stainless steel imports, as the domestic industry can produce all the grades and thicknesses required by the end-users, it said.

The domestic industry has an installed capacity of 5.04 million tonnes (MT), with current capacity utilisation at 78 per cent, there is enough scope for increasing the capacity utilisation to meet the entire domestic demand, Ficci noted. It further said zero customs duty on stainless steel scrap has helped the industry in getting raw material for stainless steel production at competitive rates, at a time when the international stainless steel scrap prices have shot up by 25-40 per cent.

The industry is dependent on scrap imports due to less availability in the country. Most of the stainless steel scrap requirement is met through imports because of the low rate of stainless steel scrap generation domestically. “Stainless steel scrap is the most important raw material required by the stainless steel industry as it is the most cost-efficient way of meeting the nickel requirements.

“The zero duty is required to encourage the stainless steel producers to keep using the EAF (electric arc furnace) route and reduce the carbon footprint of the sector when environmental sustainability is becoming an important issue world over,” it said