NEWS FLASH STEEL INDUSTRY Vol. No. 71 20 th May 2017 TOP STEEL & MINES NEWS Dumping duty on 47 steel items Govt plans land-for-asset policy to attract steel investors Demand for high value steel to grow as government s Make in India programme gets a push Narendra Modi government targets 300 mn tonnes steel production capacity by 2030; to rope in private players Steel production target tough to meet, says Crisil Volatile coking coal prices may put pressure on steel sector spreads QUIZ. ===================== We take the pleasure of accommodating our members and their acquaintances in the well decorated conference hall during their important meetings, seminars, training sessions & conferences. A prior notice and a token of nominal charges are welcome from members. Dumping duty on 47 steel items India has imposed an anti-dumping duty on 47 steel products from half-a-dozen countries - China, Japan, Korea, Russia, Brazil and Indonesia - to protect the domestic industry from cheap imports. The duty has been imposed for five years on products such as hot-rolled flat products of steel and those coated with zinc and clad steel. According to an official notification, the levy will take retrospective effect from August 8, 2016. The duties are in the range of $478-561 per tonne. The directorate of anti-dumping and allied duties (DGAD) has found out in its investigation that the items have been exported to India at below their normal value. This resulted in "material injury" to the domestic industry, the directorate said, and recommended "imposition of definitive antidumping duty on the imports of subject goods". Anti-dumping duty and imposition of a floor price on imports are some of the measures taken by the government over the past two years to protect the domestic industry. These measures prompted Japan, the world's second biggest steel producer, to ask the World Trade Organisation to set up a dispute settlement panel to examine India's actions. Indian companies such as JSW Steel, Tata Steel and SAIL have benefited from the restrictions, with imports falling around 37 per cent to 7.4 million tonnes and exports jumping 102 per cent to 8.2 million tonnes in the last fiscal. Page 1 of 7 www.srma.co.in srmakol@srma.co.in, ed@srma.co.in
Companies affected by the duties include Korea's Hyundai Steel, Posco and Samsung C&T. Japanese companies such as Honda Trading Corp, Mitsui, Nippon Steel, Sumitomo Corp, Toyoto Tshusho Corp and Marubeni-Itochu Steel come under the purview of the anti-dumping duty. From China, companies to be impacted include Jiangsu Shangang, Xinsha International, Burwill Resources, Lu Qin, GS Global and Steelco Pacific. India had imposed a provisional anti-dumping duty on steel from August 8, 2016, for six months and later extended it by two months in February. The duty is now being regularised and levied for a five-year period. Source: The Telegraph Govt plans land-for-asset policy to attract steel investors The government will also help companies secure land in exchange for equity or setting up joint-ventures with local firms. These steps will attract foreign companies to India, Sharma said. We are also working on a policy to make it easier for companies to transfer land to foreign companies so that they can set up plants without having to worry about approvals. The steel ministry has already asked its subsidiary miner NMDC Ltd to consider reviewing iron ore prices only once in three months instead of regular revisions so that prices do not swing, Sharma said. India is drafting a land-for-assets policy among a raft of measures aimed at attracting foreign investment into the world s third largest steel producing market, steel secretary Aruna Sharma said on Tuesday. Asia s third-largest economy is notorious for making it difficult for foreign companies such as Posco to buy land, losing out on billions of dollars of investments in key sectors such as steel and preventing the transfer of technology to local companies. Fluctuations in the domestic price of iron ore, which is determined by local miners, has also deterred investors. Arun Sharma told Reuters her department was preparing several policies aimed at boosting investor confidence after Prime Minister Narendra Modi last week approved a plan to nearly triple domestic steel capacity and raise consumption manifold by 2030. The government will soon issue detailed guidelines on the mandatory use of locally made steel in big government projects, and use international benchmarks to prevent companies from jacking up prices through cartels, she added. India s mining lobby has opposed any move to limit iron ore prices, but Sharma said the government would not put a cap on prices. Electrical steel Even though India is a major steel producer, it depends heavily on imports of expensive high-grade alloys used in cars and electrical equipment from countries including Japan, South Korea and Russia. One such product is cold-rolled, grain-oriented (CRGO) steel, used in power transformers. India imports 400,000 tonnes a year of CRGO, but that could fall next year as Germany s Thyssenkrupp starts production from a 50,000-tonne-a-year plant being trialled in western India, Sharma said. Top Indian steel maker JSW Steel Ltd is also keen to make CRGO steel, she added. Source:Livemint.com Page 2 of 7 www.srma.co.in srmakol@srma.co.in, ed@srma.co.in
Demand for high value steel to grow as government s Make in India programme gets a push India is set to witness an uptrend in demand for high value added steel led by thrust on domestic production in defence, ship building, renewable energy and automobile sectors under the government s Make in India programme. This is also expected to turn into a focus area of growth for domestic producers, S&P Global Platts has said in a report on opportunities in the commodities sector under Make in India programme. India is already self sufficient in commercial grade steel the grade used in infrastructure construction projects. Recent facility expansions raised India s overall steel production capacity in 2015/16 to 118 million tonne (mt), up from about 110 mt the previous year. However, a key imbalance in the Indian steel sector is a lack of high value added steel production capacity. This imbalance is expected to widen as a result of the government s Make in India campaign, and the expansion of India s passenger vehicle market. The latter is expected to reach 9.4 million units per year by 2026, up from 3.41 million passenger vehicles during fiscal 2015/16. The government is keen to see global auto makers set up manufacturing facilities within the country to supply both domestic and export markets. A similar desire to expand domestic production in the defense, shipbuilding and renewable energy industries will also drive demand for high value added steel, suggesting this will become a key focus of new investment for domestic steelmakers, the report said. Both the Make in India initiative and expected investment in infrastructure has created expectations of a substantial increase in domestic steel demand. CRISIL forecasts that Indian steel consumption will rise 5.3% year-on-year to 85.8 mt in fiscal 201617, compared with subdued average annual growth of about 3.9% over the last five years. Short term steel demand is forecast to grow at 4.55.5%, accelerating to between 66.5% CAGR up to 202021. Source: EconomicTimes Narendra Modi government targets 300 mn tonnes steel production capacity by 2030; to rope in private players The government plans to set up new steel plants on surplus land available with PSUs by forging partnership with private sector to help more than double steel production capacity to 300 million tonnes by 2030. The Cabinet yesterday approved the New Steel Policy that aims to achieve 300 million tonnes of capacity by 2030 with an additional investment of Rs 10 lakh crore. At present, the steel production capacity is 126 million tonnes. After 12 years, a new policy for steel sector has been approved, which will provide a great boost to the industry and make it globally competitive, Steel Minister Chaudhary Birender Singh told reporters here. Stating that the land acquisition is an issue under the new law, he said the government plans to utilise the surplus land of steel PSUs to set up new plant in joint venture with private companies. If we have to create steel-making capacity of 300 million tonnes, we cannot wait for long time. He favoured vertical development for making best use of the land. India is on the cusp of a transformation from a traditional brick and mortar economy. Domestic consumption of steel per capita is around 65 kg, compared with a global average of 235 kg, indicating the scope for long term demand growth, the report added. Page 3 of 7 www.srma.co.in srmakol@srma.co.in, ed@srma.co.in
Singh said the share of PSUs and private companies is expected to remain at the present level in future capacity addition. At present, the PSUs contribute 19 per cent to the total country s production capacity. Elaborating on this, Steel Secretary Aruna Sharma said the government is working out a mechanism to utilise the surplus land of PSUs for creating steel-making clusters in joint venture with private firms, including foreign companies. These will be clean land available to them (private companies), Sharma said, adding the PSUs could contribute land as equity in the JV. On NPAs in steel sector, she said it is in the last stage of getting resolved and mentioned about thee Cabinet approving issuing an ordinance to amend Banking Regulation Act in this regard yesterday. The steel minister expected that the demand for domestic steel would rise significantly after the Cabinet yesterday approved the policy for providing preference to domestically manufactured iron & steel products in government procurement. In this year, the government has budgeted Rs 4 lakh crore for infrastructure development. If even 10 per cent of this investment is on steel consumption, then there will be huge demand for domestic steel, Singh said. He expected this policy to boost FDI in steel sector as foreign companies would consider setting up plants in India. The government agencies can use imported steel only if it is not available in India, the minister said. This policy seeks to give preference to Domestically Manufactured Iron & Steel Products (DMI & SP) in the government projects. It is applicable on all government tenders where price bid is yet to be opened. Only 60 million tonnes of capacity has been added in the past decade and stagnant demand in the past five years had aggravated the debt position of the sector, it added. Several global steel majors such as POSCO and ArcelorMittal have scrapped various greenfield steel projects, owing to land acquisition and raw material linkage issues, the report said. Crisil Research expects 24-26 MT of steel capacities to be added over the next five years, leading to aggregate steel capacity to rise to 140-145 MT by 2021-22, the report said. Beyond this, the trajectory of demand growth, continued government support, and pricing environment in backdrop of global over-capacity led by China would be key determinants of pace of capacity addition. The ratings agency has also projected a 6-6.5% growth in steel demand in India over the next five years, lower than the 7% annual growth rate projected by the government till 2030. A similar trajectory of growth is expected to continue even in long run, subject to continuation of government s initiatives, the report added. Also, the policy is expected to encourage in-house production of flat and alloy steel products, reducing their share in overall imports. The National Steel Policy, launched on May 3, seeks to increase steel consumption across the major sectors, including infrastructure, automobiles, and housing, resulting in a potential increase in per capita steel consumption to 160 kg by 2030 from about 60 kg at present. The policy also envisages achieving 300 MT of steelmaking capacity by 2030 through additional investments of Rs 10 lakh crore by 2030-31, and to reduce reliance on imports to nil and develop steel exports of about 24 MT by 2030. Singh said the government is also working towards reducing the imports of coking coal and other raw materials by increasing domestic availability at competitive rate. [Source:FInancial Express] Steel production target tough to meet, says Crisil The government s ambition to add 182 million tonnes of new steel capacities over the next 14 years under the National Steel Policy is unlikely to be achieved, rating agency Crisil said in a report. Page 4 of 7 www.srma.co.in srmakol@srma.co.in, ed@srma.co.in
Even in its NSP 2005, it had envisioned exports to touch 26 MT by 2019-20, the report said. However, low cost competitiveness in global markets, and over-capacity in China, led exports to stagnate at around 5 MT over the past decade or so. In 2016-17, there was a recovery, as numerous trade barriers on Chinese steelmakers and muted domestic demand saw exports rise 102% to touch 8.2MT, it added. However, in the long term, with markets getting more concentrated, and looming risk associated with over-capacity in China, we expect exports to stay range bound between 8-10 MT. Source: The Hindu Volatile coking coal prices may put pressure on steel sector spreads The agency said it believes this may not be fully passed on and could impact profitability in Q2FY18, as domestic steel producers take about two to three months from order to consumption. The sudden surge in coking coal prices in April 2017,was led by disruption in exports from Australia, a key source of coking coal for Indian companies, due to Cyclone Debbie which damaged railway lines connecting mines. Ind-Ra believes that the current situation in Australia is temporary and once the supply situation eases, regular coking coal prices will correct from the current peak, though it may not decline to the lows of $75/tonne witnessed in January 2016. However, if coking coal prices remain high without the commensurate opportunity for the players to pass on the increased cost during FY18, the profitability could be severely impacted. KOLKATA: The volatility in input cost, mainly coking coal prices is likely to keep the steel sector spreads (difference between price and raw material cost) under pressure in FY18, India Ratings and Research (Ind-Ra) has said. The price of coking coal, a key raw material shot up in April 2017 due to Cyclone Debbie in Australia, after softening from the highs it had reached in November 2016. Ind-Ra believes the recent surge in prices is temporary and it may soften in the near term, however its unlikely to correct significantly in FY18. Ind-Ra had highlighted in the report FY18 Steel Outlook: Increased Government Spending will be the Key that the softening of input cost would be a key determinant for the steel sector s profitability. However, price of coking coal has surged by 100% to around $310/t in April 2017 month on month. Page 5 of 7 www.srma.co.in srmakol@srma.co.in, ed@srma.co.in
CENTRAL EXCISE Decisions Once the final product is treated as dutiable and duty is paid by the assessee, there is no question of reversal of CENVAT credit In the present case, the appeal has been filed by revenue against the order of CESTAT wherein CESTAT had held that when the CENVAT credit is availed on the inputs stand utilised for payment of duty on the final product, there would be no requirement for reversal of the said credit. Even, if the activity undertaken does not amount to manufacture. In this regard, the Hon ble Karnataka High Court relying on the judgement in the case of Creative Enterprises 2009 (235) E.L.T. 785 (Guj.) held that it is an undisputed position that the final product is treated as dutiable and duty is paid by the assessee. When the duty is paid treating the activity as manufacture, there arises no question of reversal of CENVAT credit. CCE vs Vishal Precision Steel Tubes & Strips Pvt Ltd (2017 TIOL 613 HC KAR-CX) V. VAT Decisions Audit objection can constitute information for the purpose of escaped assessment only if assessing officer is satisfied that turnover has escaped assessment In the present case, the taxpayer is engaged in the business of manufacturing, trading, leasing and construction business across India. During the FY 1991-92 (relevant period), assessee was involved in the execution of civil work contracts and filed returns under Bihar Finance Act, 1981 (State Act) and also under Central Sales Tax Act, 1956. The assessment proceedings in connection to the relevant period were completed and an order was passed by the assessing authority during the year 1996. Thereafter, Auditor General, Bihar, audited the aforesaid assessment order and observed that the taxpayer has claimed exemption for goods consumed during execution of works contract however, the prescribed declaration as prescribed under the Act was not filed. The said observations were communicated by the auditor to the assessing officer. Basis the said observations of the auditor, the assessing officer served Show Cause Notice (SCN), stating that the taxpayer has wrongly claimed exemption without filing mandatory declaration. Subsequently, a re-assessment order was passed demanding tax in respect of exemption wrongly claimed. Aggrieved by the same, the taxpayer filed a writ petition to the High Court (HC). The HC dismissed the appeal filed by the taxpayer. Aggrieved by order of HC, the taxpayer preferred an appeal before the Supreme Court (SC). In the said appeal, the taxpayer contended that audit objection cannot be construed as information under Section 19 of the State Act, for the purpose of reopening the assessment by the assessing officer. Further, the audit objection pertains to the consumables and there is no sale/deemed sale which involved transfer of property in execution of works contract and nonfiling of declaration does not attract tax. Also, the original assessment order specifically considered whether purchase tax is to be paid on such items and the same was decided in the favour of taxpayer. Thus, levy of tax through reassessment is a mere change of opinion by the assessing authority on the same set of facts that were available at the time of original assessment Page 6 of 7 www.srma.co.in srmakol@srma.co.in, ed@srma.co.in
It was further contended by the taxpayer that the initiation of the re-assessment proceedings and the reassessment order are illegal and the assessing officer did not know that turnover has escaped assessment and it was initiated on the basis of observations of the auditor. In this regard, the revenue contended that audit objection in the present case is an information for the purpose of re-assessment and thus, revenue has rightly re-assessed the turnover and demanded tax which was escaped by the assessee. Further, it was contended that if there is a mistake apparent on the face of the record of assessment, such record itself becomes source of information. Thus, in this case, basis the information available with the auditor and its own analysis, revenue has rightly reopened the assessment. In this connection, the SC agreed on the scope of word information as described by the revenue. However, the SC observed that a mere change of opinion of revenue on the same facts and materials on the record, does not constitute information for the purposes of the State Act. Further, SC, on perusal of the report of the audit team, observed that the assessing officer was of the opinion that since the goods has not been transferred but had been consumed by the taxpayer, it shall be out of purview of taxation. Therefore, assessing officer was not satisfied with the information submitted by the audit team and issued notice on the basis of direction given by the audit party and not on his personal satisfaction, which is not permissible under law. The SC opined that if assessing officer is satisfied that reasonable ground exist, then only assessment can be reopened by him. -------------------------------------------------------------- The nectar gives us tequila. What? The reply may please be mailed to us (ed@srma.co.in, srmakol@srma.co.in) before the close at 11.59 PM (mid night) of 27 th May 2017 ============================== Based on the above, the SC held that order passed by the DC is without jurisdiction and HC is not right in dismissing the petition filed by the taxpayer and allowed the appeal filed by the taxpayer. M/s Larsen & Toubro Ltd. vs State of Jharkhand and Ors (TS-62-SC-2017-VAT) Concept / Design / Publication Contents : SRMA, Corporate Office, Kolkata : Various Media Sources Page 7 of 7 www.srma.co.in srmakol@srma.co.in, ed@srma.co.in