(Bloomberg) - India's steel ministry is seeking to remove import tax on coking coal to soften the impact of rising costs on users of the key steel-making fuel and promote production of the alloy that's crucial for Prime Minister Narendra Modi's plan to boost domestic manufacturing.
The ministry has written to the finance department to consider its request in the federal budget on Feb. 1, federal steel secretary Aruna Sharma said in an interview in New Delhi. Her department has also proposed removing taxes on ferro-chrome and ferro-nickel, ingredients used in making stainless steel.
Benchmark prices of premium coking coal have risen 34 percent over the past year, after cyclone Debbie affected supplies from Australia, the biggest shipper of the commodity. Prices have remained high and may spike again if forecasts of another similar weather disruption come true, according to consultants Wood Mackenzie Ltd. and CRU Group.
"Doing away with the import duties will provide steelmakers some support if prices continue to rise," said Abhisar Jain, an analyst at Centrum Broking Pvt. in Mumbai. "So far the steelmakers have protected themselves by passing on the increase in raw material costs, but that becomes increasingly difficult as costs go up."
Indian steel producers, including state-run Steel Authority of India Ltd. and JSW Steel Ltd., rely on imports, mostly from Australia, for supplies of met coal.
Basic customs duty on coking coal is 2.5 percent, according to JSW Steel's Joint Managing Director Seshagiri Rao.
Story by Archana Chaudhary and Rajesh Kumar Singh.