September 14: The government's new policy on import of sponge iron and billets has been mired in controversy.  The replacement bill introduced by Finance Minister Janardan Sharma on Friday has now reduced the customs duty on import of sponge iron to zero and has significantly increased the excise duty on import of billet. This new provision has been criticised by industrialists involved in production of steel stating that it has posed risk to investment of  Rs 100 billion of 24 industries. 

The government says it adopted this new policy with the aim of protecting domestic industries and promoting the establishment of billet plants in the country. However, industrialists argue that the policy has been introduced without any prior discussions and is aimed to discourage existing industries. There are now 30 such industries across the country, of which, six industries produce steel rod in the country by importing billet and sponge iron.

The Nepal Steel Rolling Mills Association, an umbrella organization of iron rod manufacturers, denounced the new policy during a press conference in Kathmandu on September 13 and demanded that the provision should remain as it was before.

Pradip Kumar Shrestha, the founding chairman of the association, who is also the managing director of Panchakanya Group, said that 24 industries would be shut down due to the discriminatory policy on customs and excise duty.

According to him, the new provision would make 10,000 people working in this sector jobless and the government would also lose up to Rs 5 billion in revenue. "The country has been importing up to two million metric tonnes of iron and iron related materials annually," he said.

Anjan Shrestha, Managing Director of Laxmi Group, which has been producing Siddhi Laxmi Steel, claimed that such a policy was brought for the interest of few industries without discussing with the other stakeholders. He said that although the government's decision was not wrong, it would have negative consequences. He said that it should be stalled for now and moved forward after discussions. Industrialists who import billet directly from India have started pressuring the government to revoke the decision.

Speaking at the program, Kiran Sakha, Managing Director of Sakha Steel, said that this decision would force industries to shut down. He said the decision would risk the investment of the industrialists as well as the financial institutions.

The association has said that the price of iron rod produced using billets will automatically go up due to customs and excise duty. It would lead the majority of the industries to shut down, incurring huge losses. The association claims that iron rod would be dearer due to zero percent customs duty on sponge iron and 4.75 percent customs duty on billets as well as excise duty. Though it aims to promote domestic business, the goods produced by this type of industry will not be of high quality.