India's commerce ministry has likely sought to extend an export promotion scheme for the steel sector, Reuters reported on Wednesday. Quoting a senior government official, Reuters said the ministry was seeking the export promotion scheme to reimburse some local levies for domestic steel producers as the industry reels from a steep fall in shipments.

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"The finance ministry’s revenue department will take a call on this, as expanding the scheme requires additional budgetary support," Reuters said, quoting an official.

However, the commerce ministry also had to contend with competing proposals that offer production-linked incentives to domestic manufacturers, which require federal funding support, the official told Reuters.

Steel exports are currently outside the scope of the Remission of Duty and Taxes on Export Products (RoDTEP) scheme, which offers refunds against various embedded taxes across sectors such as automobiles and agricultural produce.

Levies, duties and taxes, which are not subsumed in the goods and services tax, can add 8-12 percent to costs for the steel industry, said Reuters quoted Alok Sahay, secretary general and executive head at Indian Steel Association. "The steel industry needs RoDTEP to offset these embedded costs of the industry for parity with other exporting countries," Sahay said.

The source told Reuters that the government will have to set aside nearly $244 million annually to offer refunds to the steel sector, the source added. "The government is also considering requests for inclusion of more sectors into the production-linked incentives scheme,” the source added.

During the July-September quarter, the steelmakers took a hit on profitability as prices declined due to slowing global demand and export tax on some steel products further affected shipments. In May, the government raised the export taxes on eight steel intermediates by 15 percent.

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First Published:Nov 9, 2022 12:49 PM IST