India’s steel ministry and leading steelmakers are pushing for a Border adjustment tax (BAT) to make domestic steel prices competitive and support domestic producers.
BAT, if levied, will be implemented on imported goods in addition to custom duties to bring their prices at par with domestic products. Domestic producers rue of the fact that several added-on taxes including duties on fuel, electricity, mandi tax, cut their margins, while imported goods are not burdened by such levies. This leads to low-cost imports by Indian consumers and makes domestic products lose out market share to their foreign counterparts.
India is net importer of ferrous scrap which could witness a reduction going ahead if BAT is levied. This will boost domestic demand for sponge iron which is a substitute for scrap. Sponge iron prices have increased over a couple of weeks due to increased demand from domestic mills.
Steel Minister, Dharmendra Pradhan is advocating increased use of steel in India to boost domestic demand and support the country’s self-reliance mission to combat the impact of COVID-19 pandemic. To curb imports, the government could levy BAT and bring tax parity between imports and domestic produce. BAT was proposed towards the end of 2019 by the commerce ministry to safeguard steel sector, however, it was not adopted in the 2020 fiscal budget.