Budget 2022: Key takeaways for metals & mining sector players

In this pandemic environment, the industry's expectation was to get the support of the government in order to have a competitive standing, especially with global peers. 

Union Budget 2022, released on February 1, has to some extent taken care of such expectations with Finance Minister Nirmala Sitharaman positioning impetus on industry growth and continuity.

Some of the expectations positioned by industrial bodies ahead of the Budget 2022 towards providing support and sustaining competition amidst rising prices of metals, has been taken note of to an extent.

Also Read: Budget 2022: Metals & mining sector seeks measures to boost investments, exports
 
With the government's plan to transition to a carbon-neutral economy by announcing projects for coal gasification and conversion of coal into chemicals, push on infrastructure through the PM Gati Shakti scheme and a significant increase on capital spend budget, the M&M sector should see a positive impact.  
 
Taking a cue from the outcome of Economic Survey 2021-22 released just before the Budget, the sector has been struggling with 2020-21 industrial production in the mining sector and manufacture of other non-metallic mineral products for 2020-21 going below 2015-16 and 2013-14 levels, respectively. 
 
Prices of mineral oils and Iron, Steel & ferro alloys were seen to be on a rising trajectory, making India's domestic production in the global environment uncompetitive, particularly in hindsight of the proposed Carbon Border Adjustment Mechanism (CABM) or the EU Carbon Tax. 

Also Read: Steel industry can steer India towards $5 tn economy by 2025: EY-CII report

Steps like extension of customs duty exemption on import of steel scrap by another year (until March 31, 2023) and revocation of anti-dumping and countervailing duty on specified steel products, is a cure to this cause of the industry providing competitive support to secondary steel manufacturers by optimising the cost of industrial production. 
 
On the corporate tax front as well, the extension of the date to commence manufacturing activity (by a year until March 31, 2024) is much acknowledged, possibly motivating foreign investments in the M&M sector for consideration of concessional tax rate. 
 
While a relaxed import duty structure could have lent further support, the above measures cannot be considered hostile and are expected to contribute towards growth and competitiveness in the M&M sector in the wake of the recently approved PLI (Production Linked Incentive) scheme for specialty steels. 
 
(The author is Partner and Energy Tax Leader - EY India.) 
 
(Devansh Jain, Senior Tax Professional also contributed to the article)