The Ministry has asked the Committee of Secretaries (CoS) to consider rolling back the export duty on flat products given the fall in its prices and also due to the self-restraint exercised by steel makers in shipping their output overseas. The Finance Ministry would take a final view after the CoS agrees to the proposal, Steel Ministry sources told The Indian Express.

Some producers engaged in producing value-added steel products have said that export duty on cold rolled, galvanised and coated sheets as well as pipes and tubes, the inputs for which are hot rolled coils imported under the Advance Licensing Scheme, should be exempted from the purview of the export duty.

The Ministry has also favoured imposition of 15 per cent ad valorem duty on iron ore exports to ensure raw material security to the domestic industry, which has announced major capacity expansion plans. The government had imposed an export duty of 15 per cent on primary or semi finished steel and HR (hot rolled) coils and 10 per cent duty on rolled products, including cold rolled coils and sheets.

In a meeting with Prime Minister Manmohan Singh earlier this month, steel makers pledged to cut prices by Rs 4,000 a tonne and hold the price line for the next three months. Industry sources, however, said that the export duty hurt their profits at a time when global raw material prices have seen a spike.

What has augmented the industry’s anxiety is that certain types of steel products have no domestic takers and if exports were disincentivised, it would only add to their inventory. As a precursor to imposition of the duty, the government withdrew the Duty Entitlement Pass Book (DEPB) scheme, which is bound to deplete their coffers by about Rs 600 crore.

The Federation of Indian Chambers of Commerce and Industry (Ficci) said that the export duty would affect prospective investments worth Rs 1 lakh crore. In a representation to finance minister P Chidambaram, it said that the government’s decision would not only affect revenues of steel companies, but also their prospective investment plans.

It noted that performance of the steel sector has shown signs of a slowdown, with production of finished steel growing by a meagre 5.1 per cent in April-March 2007-08 compared with a 13.1 per cent increase in the previous fiscal. Ficci observed that the Reserve Bank of India (RBI), in its survey, found that the gross profit margin ratios of 105 iron and steel companies declined in the first quarter of this fiscal vis-a-vis the first quarter of the last financial year.

•Flat products are used to make auto grade steel & consumer durables

•Export duty has hit steel co profits in wake of sharp raw material price rise

•Some steel products have no domestic takers; exports curbs only add to their inventories

•Steel Ministry also wants 15% ad valorem duty on iron ore exports