Ferro nickel is the prime raw material used for making stainless steel. About 70% of stainless steel produced for domestic market goes into making utensils. The duty cut with soft global nickel prices would mean price of utensil grade steel ( low nickel content ) reducing by around Rs.10,000 per tonne to around Rs. 90,000 per tonne. This is expected to act as an incentive to utensil makers to pass on the benefit to consumers.

According to projections made by Australian Commodities, while nickel prices rose by over 50% in 2007, in 2008 its prices may fall by 25% to a level of about $28,000 per tonne. "Duty cut on ferro alloy has been become imminent as the Budget 2007 had created distortions in import duty of raw material used by the stainless steel industry. The reduction would bring duty on ferro alloy at par with unwrought nickel, nickel oxide sinter and other intermediate products of nickel. This would encourage stainless steel production and give a boost to the utensils industry," an official said.

The budget 2007-08 left import duty on ferro nickel unchanged at 5% while reducing the duty on other grades of nickel (to 2%) that is not used for stainless steel making but is used for various industrial applications including electroplating producing cadmium batteries and alloy steel. The move would rationalize the import duty structure for the product segment and facilitate imports of ferro nickel , which is not produced in the country and entire requirement is imported.

While duty rationalzation would cheer stainless steel consumers, the industry is expected to be only partially satsfied. The stainless steel industry has demanded a complete withdrawal of duty on nickel. "This is unlikely to be accepted in this year's budget. The government intends to maintain a basic duty shield on stainless steel raw materias for some more time," the official said. Currently, the country produces around 2mt of stainless steel. Around 1.3mt is used in the domestic market around 0.5mt is exported.

(Courtesy: The Economic Times dt. 17.1.2008, P-7)