Budget 2022: Metals & mining sector seeks measures to boost investments, exports

With the recent economic and market shift running on turbulent path owing to sporadic advent of recent COVID-19 situation not only in India but globally, metals and mining sector which forms the backbone of industrial stimulation cannot be kept in isolation.

As we inch closer to announcement of Budget 2022-23, industry will have eyes on what actions are considered by government to ensure competitive spirit and increase in investments, in retrospection of recent increase in prices adding to India's struggle against competition.

One key area of concern is the rising cost of production of metals like aluminum and steel. Experiences can be drawn from competitive economies like China to reflect measures which can support the sector domestically by allowing lower incidence of operational costs -- electricity duty, raw materials, fiscal taxes. With shortage in domestic iron ore supply, reliance on import is evident and hence, a relaxed import duty structure can change the wind.

Globally as well, proposed Carbon Border Adjustment Mechanism (CABM) or the EU Carbon Tax to be levied on imports in EU is expected to make India's products costlier. The government can consider neutralising such proposed rise in landed cost of Indian exports by relaxing the duty structure on essential inputs required for production of metals. 

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With PLI (Production Linked Incentive) scheme for specialty steels now approved, we can expect a significant boost to indigenous production. Similar to this, schemes like Project Import or MOOWR (Manufacturing and Other Operations in Warehouse Regulations, 2019) could be also be explored permitting import of steel (and other) products for utilisation as raw material for export thereof. This can boost exports by further lowering the cost of production.

Another area where the industry would be keen to have a view on is availability of lower tax rate of 15 per cent (plus, applicable surcharge and cess) on new manufacturing activity to metals and mining sector and allied activities as well, under Section 115BAB of the Income-tax Act, 1961. With an objective to boost indigenous activity as well as attract newer investments from global players, absolute clarity on activities to be considered for availing this lower rate as well as extension of sunset date from March 31, 2023 to two years ahead can be considered.

While large cash splurge towards metals and mining sector may or may not happen, consideration of some of the measures discussed could aid growth and rise in investments amidst the need for increased competitiveness and proposed actions being considered globally which can have an impact on India's export trade, especially for steel and related products.

(Raju Kumar is Partner - Energy Tax Leader, EY India. Devansh Jain, Senior Tax Professional at EY India also contributed to the article.)

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