Steel producers oppose govt's easing of import rules

Say the government's move will destroy local steel mills

Domestic producers have strongly protested at the government’s decision to liberalise import of steel and steel products for certain critical applications without meeting local quality specifications.

The Union commerce ministry through a notification on Wednesday allowed such import for mega projects, with an investment of over Rs 1,000 crore. These include mass consumption sectors such as infrastructure, petroleum, nuclear reactors and defence, exempted from applicability of local quality standards. The exporters will, however, have to obtain quality certificates from their country of origin.

Domestic producers say this comes at a time when demand in the country has weakened due to depleting investments in infrastructure and manufacturing. There is also a shortage of iron ore, the key raw material. Imports have been growing year-on-year due to various factors.

Data compiled by the Joint Plant Committee under the ministry of steel showed India’s total import at 7.9 million tonnes in 2012-13, a rise of 14.6 per cent from the 6.9 mt of the previous year.

“The decision of the ministry of commerce to allow import of steel without quality certification is surprising and a retrograde step. The views of the domestic steel industry which has put up capacity of over 85 million tonnes (crude) till date, with expansion also underway, should have been mandatorily taken. Quality certification is a prerequisite for areas such nuclear, defence, a high-end manufacturing, as it will have a bearing on the end product. The steel industry is already hit from all sides, including high input cost, cheap FTA imports, proposed reduction export duty on iron ore and the weakening demand in the domestic market. The new rule has the potential to jeopardise the steel industry, due to the threat of cheap imports from countries like Ukraine, China, etc. We request the ministry of commerce to review this decision and maintain status quo,” said H Shivaramkrishnan, chief commercial officer, Essar Steel India

“The long-term implication is dangerous, as the domestic industry is facing surplus output. The industry needs a curb on imports to prosper. The government’s latest move will further boost imports of steel, resulting in idling of local production capacity,” said Seshagiri Rao, joint managing director of JSW Steel.

“When we request the government to set up a quality norm for use of steel in India, at least with the Bureau of Indian Standards, the government says no. In fact, the quality of Indian steel is at par with global major players. Hence, there is no need for encouraging imports. We will soon take a representation to the government with a request to revisit its decision,” said Rao.

Steel scenario (million tonnes)
Particulars	2011-12	2012-13	Variations (%)
Production	84.40	87.10	3.2
Consumption	71.02	73.34	3.3
Imports	6.86	7.87	14.6
Exports	4.59	5.25	14.3
Source: Joint Plant Committee

Steel production and consumption in 2012-13 grew a marginal 3.2 per cent and 3.3 per cent, respectively, due to lack of fresh investment in the manufacturing sector and in infrastructure. The scenario is unlikely to change any time soon.

The notification provides exemption to large industries to import steel and steel products even if they are non-compliant with the quality standards set out in the 2012 order. This will provide more avenues to large industrial consumers to import steel and would increase competition for the domestic industry,” said Pukhraj Sethiya, consultant (mining), Pricewa-terhouseCoopers.