India's Metals and Mining Industry Poised for Revival Despite Major Budgetary Support

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Researched by Industrial Info Resources India (Delhi, India)--Although no major policy measure has been set in the 2014-15 budget, India's Metals and Mining sector is still expected to see a substantial investment due to rise in demand of metals in the key end-use sectors. In its maiden budget, the Narendra Modi-led government has announced several infrastructure enhancement measures which are likely to trigger an investment cycle and revive the subdued steel demand in the country.

Infrastructure development would involve creation of 100 smart cities, renovation and modernization of airports and seaports as well as enhancement of rural and suburban road network. This would also entail extension of rapid transit railway system in non-metro cities along with plans for doubling the capacity for the country's petroleum pipeline network and industrial corridors.

The biggest consumer of Indian metal industry, Indian Railways has come up with its highest ever plan outlay of approximately $10,900 million in the Budget 2014-15. The plan for the railway sector includes introduction of 58 new trains, extension of 11 train routes, developing stations with international standards on Public Private Partnership (PPP) model. The first bullet train project between Mumbai and Ahmedabad route tops the priority list with railways also launching high-speed trains to connect major cities.

Steel companies will also have some additional benefit as basic custom duty on steel grade limestone and dolomite, used in steel making process, has been reduced from 5% to 2.5%.

However, a proposal to revise the royalty on minerals, which is expected to be increased from the existing 10% to 15%, and imposition of 2.5% custom duty on coking coal, will impact the metal industry. The increase in royalty would mainly hit low-grade iron ore miners in Goa. About 60% of the country's iron ore reserves are located in the eastern states of Odisha and Jharkhand. They contain high grade ores. Chhattisgarh, Karnataka and Goa are the other major producers.

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