NEW DELHI, APRIL 29: With rise in steel prices continuing to be a significant factor behind the overall inflation rate, Finance Minister P Chidambaram today announced a slew of measures aimed at augmenting “the domestic availability of steel products” and softening their prices.

Replying to the debate on the Finance Bill of 2008 — the Left parties walked out of Lok Sabha just before the Bill was cleared by a voice vote — Chidambaram said “despite the fiscal steps taken by us, some sectors like steel continue to exhibit sharp increase in prices”.

Pointing out that the rise in steel prices “contributes 21.3 per cent” to the overall inflation, he rolled out a series of measures to keep prices of steel under check. These include:

• Slashing basic customs duties from 5 per cent to zero on pig iron and mild steel products viz. sponge iron, granules and powders; ingots, billets, semi-finished products, hot rolled coils, cold rolled coils, coated coils/sheets, bars and rods, angle shapes and sections and wires.

• Fully exempt the import of TMT bars and structurals (commonly used for construction of houses) from 14 per cent CVD.

• Slashing customs duty from 5 per cent to zero on metallurgical coke, ferro alloys and zinc — three important inputs used for manufacturing steel.

Highlighting that the “objective of containing domestic prices will not be achieved unless we augment the domestic supply/availability of intermediates and finished products”, Chidambaram said there was a case for “disincentivizing the export of steel”.

In that regard, he announced three different rates:

•15 per cent export duty on specified primary forms and semi-finished products, and hot rolled coils/sheet.

•10 per cent export duty on specified rolled products including cold-rolled coils/sheets and pipes and tubes.

• 5 per cent export duty on galvanized steel in coil/sheet form.

He said “a uniform statutory rate of 20 per cent” was being incorporated in the Export Schedule and that these rates would operate through notification.

Apart from steel, the Finance Minister took steps to improve the availability of some important food items and thereby keep their prices under check. First, over and above the minimum export price, he levied a stiff duty on the export of basmati rice. Pointing out that “margins of exports of basmati rice have been rising as a result of buoyancy in international markets”, he imposed a duty of Rs 8,000 per tonne on the export of basmati rice while marginally reducing the MEP from $ 1200 to $1000 per tonne.

In order to improve availability of milk during summer months, he announced a 10 per cent cut in basic customs duty on skimmed milk powder, bringing it down from 15 per cent to 5 per cent. He announced a similar 10 per cent cut in duty on butter oil (used for reconstituting milk) — down from 40 to 30 per cent.

While changes in import duty would be effective from today, Chidambaram said that changes in export duty would come into effect from the date the Finance Bill, 2008 receives the assent of the President.

Even tough this was not part of the package to tackle inflation, he removed the specific duty of Rs 600 per tonne on cement (for cement sold above Rs 250 per 50 kg bag) and introduced an ad valorem rate of 12 per cent of retail sale price.

Estimates show that anti-inflationary measures since the Budget, including those announced today, have resulted in a revenue loss of nearly Rs 4,800 crore.