The Indian government’s recent imposition of 15 percent export tax on pig iron “will not have any positive impact on the domestic steel industry but will have an adverse impact on producers from unviable export opportunities”, the industry representative body, the Federation of Indian Chambers of Commerce and Industry (FICCI), said in a communication to India’s ministry of finance.
The FICCI said that, with curtailment of exports in the wake of the export duty, producers will be forced to reduce output because of weak domestic demand and higher costs of exports.
In the current fiscal year, pig iron production is an estimated 5.76 million mt, against an installed capacity of 7 million mt. Domestic consumption of pig iron has come down from 9.90 million mt in the fiscal year 2016-17 to 4.94 million mt in the fiscal year 2020-21, the FICCI said in the communication to the ministry.
The FICCI said that the drastic reduction in use of pig iron was because of the shift to steel scrap which was made import duty-free last year and, as a result, pig iron producers were being forced to export at break-even price levels to maintain plant utilization levels at a bare minimum.
According to the FICCI, a large number of pig iron producers of small and medium scale are being forced to sell at negative margins as exports are unviable and domestic demand is weak.