Minimum import price on steel likely

Commerce dept may issue a notification for imposition of MIP, which would set the floor price, below which imports into the country would not be allowed

The distressed domestic steel industry will get another layer of protection with the National Democratic Alliance government expected to notify a minimum import price (MIP) for steel products later this week. Products under 14 categories would have different duties for base and special grades.

The commerce department is likely to issue a notification for imposition of MIP, which would set the floor price, below which imports into the country would not be allowed. A person in the know said the commerce department had asked the steel ministry to reduce the number of items, so that the entire range is not covered. The government had earlier imposed a provisional safeguard duty of 20 per cent on hot-rolled coils.

Last week, the steel ministry had sent a comprehensive list of 14 categories with around 40 products to the commerce and industry ministry. These included pig iron, heavy melting and shredded scrap, semi-finished products, quarto plates, cold-rolled coils, coated flat steel products, all kinds of steel pipes and tubes, flat-rolled products of stainless steel, bars and rods, among others.

The government is likely to put in place a mechanism whereby if the free-on-board price at the point of origin according to major steel indices is lower than the invoiced one, the listed price would be considered for enforcing MIP.

The department of commerce would, however, exempt exporters of products from the MIP norm if imports were being used for manufacturing export products. To prevent misuse of this, the department is mulling a mandatory export obligation within six months, besides refund of actual value and MIP.

Sections 3 and 5 of the Foreign Trade (Development & Regulation) Act and Section 11 of the Customs Act enable notification of such a threshold price. The MIP is defined as equivalent to the weighted average global price of a product and the non-injury price arrived at during the course of safeguard and anti-dumping proceedings, whichever is lower.

Steel companies had accumulated losses of Rs 4,238 crore in the September quarter, against Rs 4,647 crore profit in the year-ago period. The Steel Authority of India made its highest-ever earnings before interest, taxes, depreciation and amortisation loss of Rs 3,900 crore for every tonne of steel produced in the second quarter this financial year. Besides, 145 steel and iron companies have accumulated debt of Rs 2.98 lakh crore and an unfavourable debt to equity ratio of 1.27, according to a report by CARE Ratings.

A person close to the development said India was among the few countries where demand for steel products was rising but the companies were in losses. "Domestic demand is expected to rise by 7.3 per cent this year but industry is in downturn because of predatory pricing by Korean, Japanese and Chinese companies," he said. According to World Steel Association data, global steel demand this year is minus 1.7 per cent. In China, it is minus 3.5 per cent, South Korea is minus 1.3 per cent and Japan is minus 5.4 per cent.

Till October this year, seven million tonnes (mt) of steel were imported against 5 mt in 2013-14. The imports are expected to reach 15 mt this year. "The rate and predatory pricing is worrying. The government wants to make the industry net importer of steel," said a senior official.