Budget 2024: Steel industry cheers import duty cuts, continued infra push

Mumbai: The Union Budget for 2024-25 gives India’s steel industry several reasons to cheer, including import duty cuts on several raw materials and indirect benefits from increased spending on infrastructure and affordable housing.

Finance minister Nirmala Sitharaman said in her budget speech on Tuesday that the government would remove the 2.5% basic customs duty (BCD) on the import of ferronickel. Ferronickel is a key raw material for stainless steel and other specialty alloys. 

Similarly, 25 critical minerals will also attract zero BCD. Ferrous scrap will continue to be exempt from BCD for another two years, until till 31 March 2026. Steelmakers use ferrous scrap as a minor input material.

“The budget has made a host of positive announcements for the country’s stainless-steel industry," said Anubhav Kathuria, director at Synergy Steels. "The removal of basic customs duty on ferronickel is a positive step, as is the decision to exempt 25 critical minerals from customs duty. The stainless-steel industry, in particular, will wait to see if molybdenum is in the list of 25.”

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The steel sector also welcomed the government’s decision to facilitate financial support for manufacturing high-grade steel in India, Kathuria said. “However, we hope that such support shall also be made available for strengthening the country’s high-grade stainless-steel offerings,” he added.

Indirect benefits

The government’s plan to provide an additional two crore affordable houses in the next five years and the continuation of its infrastructure-led economic growth policy will also help the steel industry, experts said.

“Budgetary government capex growth of 17.7% and healthy allocation for housing under PMAY (Pradhan Mantri Awas Yojna) will continue to provide an impetus to domestic steel and cement demand in fiscal 2025,” said Ankit Hakhu, director, CRISIL Ratings Ltd.

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“This will support the credit profiles of domestic steel and cement players riding on the expected growth in infrastructure and housing spends, which together account for 60-65% of India’s steel demand and more than 80% of cement demand,” he said.

The expected increase in domestic demand for steel will also help steelmakers combat the headwind of weak global demand, he said. Prices of steel have remained muted in recent months owing to a weak global demand and overcapacity in China, the world’s largest steel producer.

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