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Steel demand may go up with excise duty cut on automobiles

Reeling under subdued demand for long, the domestic steel industry now hopes that the proposal to reduce excise duty on automobiles in the Interim Budget 2014-15 would spur demand for flat products.

"The proposal to reduce excise duty on automobiles in the current economic environment is a welcome step. However it would have been more meaningful and impactful if the excise duty on steel would have been reduced," Essar Steel executive Vice Chairman Firdose Vandrevala said in a statement.

Presenting the Budget in Parliament today, Finance Minister P Chidambaram proposed reduction in excise duty on SUVs to 24 per cent from 30 per cent, and on small cars to 8 per cent from 12 per cent earlier. He has also proposed duty cuts on large and mid-segment cars.

Flat products are used in automobile sector. The excise duty cut proposal is likely to propel growth in auto demand.

"This would have had a positive and deeper influence on a wider section of Indian Industry. Nonetheless, something is better than nothing!," Vandrevala said.

Auto sector consumes around 2 million tonne steel a year. The domestic steel industry, which has about 96 MT of manufacturing capacity, has been hurt due to a host of reasons including poor demand since FY'11. During the April-December period of the current fiscal, steel consumption grew by just 0.5 per cent.

SAIL Chairman C S Verma recently said the worst phase of steel sector was over with demands going up and liquidation of inventories taking place.