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Auto component industry fears prices may go up on steel customs duty hike

Indian auto component industry fears pricing pressure with the customs duty increase on flat rolled steel. The Budget has proposed a customs duty increase on non alloy, flat rolled steel from 5% to 7%. This, the ancillary industry feels, will effectively push up landed costs and create a benchmark for domestic steel manufacturers to hike prices.

Mr Vidyashankar Krishnan MD of MM Forgings said that “Domestic steel makers are talking of increasing prices to keep up with market forces. Some have already increased prices. This will directly impact the auto component manufacturers who have no choice but to pass on the price increase to customers. This will, of course, depend on the nature of contract and relationship with the customer.”

Mr Srivats Ram past president of the Automotive Component Manufacturers Association and MD of Wheels India said that “Steel is a primary product for the auto component industry and component makers importing steel will incur huge costs. With the rupee depreciation already acting as an automatic protection for the domestic steel industry and demand and growth for steel at the moment low, there was no reason for the customs duty to be raised.”

Completing the double whammy effect is the two per cent rise in excise duty from 10% to 12%. Mr Ram said that “At a time when inflation is at its peak, this hike will harm the auto and auto parts industry marginally.”