As part of its strategy against import of cheap steel products, India will review its decision of imposing a minimum import price (MIP) on steel on 12 April, two months after it was imposed.
MIP helps in setting a floor price, which in turn does not allow steel imports below this price.
The National Democratic Alliance government has taken several protective measures against import of cheap steel products. These include imposing a minimum import price on 173 types of steel products ranging from $341-752 per tonne on 5 February 2016 for a period of six months by the Directorate General of Foreign Trade (DGFT), an organisation attached to the ministry of commerce and industry.
According to two government officials aware of the development, the decision of imposing MIP will be reviewed next week to gauge how it has done and what has been the impact on steel imports.
This comes at a time when domestic steel manufacturers are reeling under the impact of cheap steel imports from China and struggling to service their debt. According to Reserve Bank of India (RBI) data, there are around Rs4 trillion worth of gross non-performing assets (NPAs) on the loan books of Indian banks.
The review meeting next week will be attended by senior officials from the ministries of steel, commerce and the Central Board of Excise and Customs (CBEC), part of department of revenue under the ministry of finance. The exercise will be aimed at understanding whether the MIP imposed to safeguard steel industry from cheap steel imports has had any impact on in-bound shipments.
“Ministry of steel may ask for extending the minimum import price to stainless steel products as they were kept out of MIP mechanism announced in February,” said one of the government officials quoted above.
The steel sector has been under pressure globally due to a structural demand slowdown in all large steel consuming countries and significant overcapacity in China. To counter subsidies provided to Chinese stainless steel manufacturers by its government, India is also investigating whether to levy a countervailing duty on the product’s import from China to protect Indian manufacturers, VCCircle reported on 14 March.
Queries emailed to the spokespersons of the ministries of steel, commerce and finance on 4 April remained unanswered.
China has improved its steel production capacity and registered a production of 803.8 million tonnes (MT) for financial year 2014-15. India’s consumption of finished steel was 77 million MT for financial year 2014-15. Of this, imports accounted for 9.32 MT, a jump of 71% over the previous fiscal. Import of finished steel has further gone up to 10.216 MT till February this financial year compared with 9.32 MT in FY2014-15.
However, on a monthly basis imports have been falling marginally. “Since the month of January, we have seen steel imports coming down and there was a marginal decline in imports during February, too. We expect a strong pull back in April with MIP being in place,” said Bijoy Thomas, analyst at India Ratings and Research Pvt. Ltd.
Also, on the one hand the government has extended the provisional safeguard duty on steel till March 2018, and on the other, the steel ministry has tasked consultancy firm KPMG India and investment bank SBI Capital Markets Ltd to assist in working out a bailout package.
Interestingly, India’s Economic Survey 2016 stated that any future safeguards for the steel industry may not be in the best interest of the downstream industries.
Also, India’s commerce and industry minister Nirmala Sitharaman on 4 April said that her ministry was not in favour of additional steps to check cheap steel imports, news agency Press Trust of India reported.