The reduction of duty on steel products, as proposed in the Budget 2021-22, may bring down prices of the metal by up to 10 per cent in the near term, according to ICRA.
In her Budget Speech on Monday, Finance Minister Nirmala Sitharaman announced reducing the duty to 7.5 per cent on products like primary/semi-finished products of non-alloy steel, long products of non-alloy, stainless and alloy steel.
The 2.5 per cent duty on iron and steel melting scrap, including stainless steel scrap, and raw materials used in the manufacture of CRGO (cold-rolled grain oriented) steel has been lowered to nil in the Budget.
Besides, she also announced revocation of anti-dumping duty (ADD), while countervailing duty (CVD) has also been revoked on certain steel products.
"Duty cut could bring down domestic steel prices by up to 10 per cent in the near term," ICRA said in a statement on Friday.
The ratings agency said domestic hot-rolled coil (HRC) prices witnessed a steep rise of about 54 per cent during July-December 2020 from the level of Rs 36,250 a tonne at the end of June, on the back of a strong recovery in the domestic demand.
The prices increased further in January 2021 to touch a record of Rs 58,000 per tonne and are currently trading at Rs 56,000 per tonne, it said.
"The government, as part of the Union Budget 2021-22, announced a reduction in customs duty on flat steel products to protect the interests of the end-user industries of steel from such elevated steel prices," the agency noted.
ICRA believes that the duty reduction on steel products would make their imports more competitive and, in turn, exert near-term pricing pressures on domestic steelmakers.