Posted on 02 Feb 2023
The Indian government in its union budget of 2023-24 has steeply lifted capital expenditure that will bolster steel consumption, and extended the exemption on steel scrap customs duty to facilitate the raw material's availability.
India's finance minister Nirmala Sitharaman has announced an increase in the effective capital expenditure by 28pc on the year to Rs13.7 trillion, which will account for 4.5pc of GDP, while capital investment outlay was increased by 33pc on the year to Rs10 trillion ($122bn), which would be 3.3pc of the country's GDP.
The government has also allocated the highest ever capital outlay of Rs2.40 trillion for railways.
The budget "has hit the right notes to fuel growth across industries and propel India to become a global manufacturing hub," said Indian Steel Association (ISA) president and AM/NS India chief executive Dilip Oommen. The thrust to fast-track infrastructure development and the highest ever capital allocation for railways will translate into robust domestic steel demand, he said.
The capital outlay for the Pradhan Mantri Awas Yojana (PMAY) housing project has been increased by 66pc on the year to over Rs790bn, and by 17pc for the Jal Jeevan Mission drinking water project to Rs700bn. These investments are positive for long steel and pipe manufacturers, Indian credit rating agency Icra group senior vice-president and head of corporate sector ratings Jayanta Roy said.
The government has further announced 50 additional airports and an Urban Infrastructure Development Fund to build facilities and structures in tier 2 and tier 3 cities with an investment of Rs100bn per annum for this purpose.
The finance minister said 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer and food grains sectors have been identified, which will receive an investment of Rs750bn from the government and Rs150bn from private sources.
Domestic steel demand is expected to be largely driven by government-led infrastructure projects this year. Infrastructure and construction segment accounts for 62pc of steel consumption in the country.
The industry has also welcomed the extension of customs duty waiver on ferrous scrap for another year. This is the second consecutive year of duty exemption. It was first lowered to 0pc in the union budget of 2021-22.
The government has also allocated funds to scrap old vehicles of the central government and assured support in replacing old vehicles and ambulances.
The exemption in basic customs duty on ferrous scrap will continue to help the availability of the raw material for the secondary steel sector, Material Recycling Association of India (MRAI) president Sanjay Mehta said, adding the support to vehicle scrappage policy will further ensure raw material security.
Lower availability of domestic scrap and shortages of direct reduced iron (DRI) boosted India's ferrous scrap imports last year.
Source:Argus Media
