Metal sector disappointed, wanted more from the Budget

Metal sector players are not so happy with the Budget. 

Budget provisions  

The following announcements have been proposed in the Union budget 2015-16  

Basic Customs Duty on metallurgical coke is being increased from 2.5% to 5%.  

SAD on melting scrap of iron & steel including stainless steel scrap for melting, copper scrap, brass scrap and aluminium scrap is being reduced from 4% to 2%.  

Proposed to increases the Scheduled rate of Clean Energy Cess levied on coal, lignite and peat to Rs 300 per tonne from Rs 100 per tonne. The effective rate of Clean Energy Cess is being increased to Rs 200 per tonne from Rs 100 per tonne.  

Budget 2015: Complete Coverage

Proposed to reduce the tariff rate of basic customs duty on bituminous coal to 10% from 55%  

Industry Expectations-Not Fulfilled  

Aluminium & Aluminium Products 

Expect basic customs duty on Aluminium products may be increased from present 5% to 10%.  

Expect basic customs duty on Aluminium Scrap at 2.5% may be raised and brought on par with the duty on Aluminium products at 5%.  

Expect export duty of 5% to be imposed on export of alumina  

Expect aluminium Ingots be included under the Interest Subvention Scheme to increase its exports  

Copper & Copper Products  

Expect copper concentrate to be exempted from basic customs duty.  

Expect basic customs duty on copper products to be increased from present 5% to 10%.  

In the Union Budget 2011-12, Government had exempted gold and silver content in imported copper concentrate from basic customs duty to encourage production of precious metals through the copper concentrate route.

Budget 2015: Complete Coverage

The exemption is subject to the condition that the importer produces an assay certificate from the mining company specifying separately, the value of gold and silver content in such copper concentrate.

However a significant quantity of copper concentrate is procured from traders or from trading companies of the miners.

This trade route has been inadvertently left out of the notification. Industry expects that the notification be amended so as to make the assay certificate from the supplier of concentrate as an adequate condition rather than assay certificate from the mining company  

Zinc and lead  

Expect basic custom duty on Zinc Ingots, Lead Ingots, Zinc Alloys, Zinc scrap and Lead Scrap, may be increased from existing 5% to 7.5% and on Zinc oxide from existing 7.5% to 10%  

Expect basic Customs duty on Lead concentrates be reduced from 2.5% to Nil  

Budget impact  

Union Budget for 2015-16 has increased Clean Energy Cess on coal Rs 200 per tonne from Rs 100 per tonne which is mildly negative for non ferrous companies.  

Stocks to watch  

Sesa Sterlite, Hindustan Copper, Hindalco Industries, Nalco, Hindustan Zinc  

Outlook

Union Budget for 2015-16 has increased Clean Energy Cess on coal Rs 200 per tonne from Rs 100 per tonne which is mildly negative for non ferrous companies.

The increase in Clean Energy Cess and Service tax will increase cost of coal by 4 to 6 paise per kWh. Overall Industry was disappointed with non fulfillment of its demand.