Faced with huge decline in orders from domestic as well as international markets due to the global financial meltdown, the Rs 8,500 crore ferro alloys industry has sought government intervention to protect the industry from cheap imports.
Emphasising the need for protection, the Indian Ferro Alloys Producers’ Association has demanded from the government to restore basic customs duty on imports of ferro alloys excluding ferro nickel for which the country is fully reliant on imports, to 10 per cent as it was three years ago. From the levels of 10 per cent in 2005-06, the customs duty was reduced to “nil” in phases last year.
The association, in its pre-Budget recommendation to the government, argued that this man power-intensive industry has been severely hit by global financial meltdown as consumer industry’s demand has declined dramatically. This has resulted into a spurt in stockpiling. This has lead to a reduction in production and huge unemployment. The situation has worsened by the declining prices globally as well as in the domestic markets.
The industry, till last year, was working around 70 per cent of its production capacity. But, owing to the economic recession, the capacity utilisation has declined by 30-40 per cent.
Meanwhile, India’s imports of ferro alloys have witnessed a phenomenal increase to Rs 1,089.45 crore during financial year 2007-08 as against Rs 779.82 crore during the previous year. However, total arrival on domestic port was recorded at Rs 815.39 crore during the first half of the financial year 2008-09.
Although, ferro alloys are used in very small quantities for steelmaking which constitute less then 1 per cent of the value of raw materials, steel industry cannot rule out applications of these valued raw materials.
Although, the government waived 4 per cent additional customs duty (ACD) on imports of roasted molybdenum ore in 2007-08, the duty on nickel plate is still adding to the Cenvat which is hurting the industry badly.
The association argued that nickel magnesium alloy was a finished product which is used as raw material by steel roll industries. The additional customs duty of 4 per cent imposed in the Budget 2006-07 is affecting the industry, since the raw material basically is imported nickel plates which constitutes 85 per cent of nickel magnesium. There is further addition of 15 per cent of other raw material, which is very meagre.
The main objective of government for levying of 4 per cent ACD was to have a level playing field for the local manufacturers against imports, but such inputs are not readily available in India, and have 100 per cent import dependent. Therefore, this move is affecting the industry to a large extent and their survival is at stake.
Currently, the industry is working at very low margin of about 2 per cent, out of which essentials deductions - fixed cost such as overheads, sales and marketing expenses, interest charges, depreciation and other such costs, leaving very little net margin to the industry, the paper presented to the Finance Minister, included.
Source: Business Standard
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