Indian Steel Makers Push For Continuation Of Minimum Import Price

28 July 2016

Large domestic steel makers are pushing for a continuation of minimum import price, a measure that has helped cut cheap imports and firm up steel prices in the home market.

The protectionist measure, introduced by the government in February on 173 steel items for six months, is due to end on August 5.

Big players like JSW, Tata Steel and state-owned Steel Authority of India (Sail) want MIP to continue as it has helped them improve their margins by reining in steel imports in the last nine months.

"MIP has benefitted the domestic steel industry," PK Singh, chairman of SAIL, told ET. The new steel minister, Chaudhury Birender Singh, recently tweeted that SAIL had requested the steel ministry for an extension of the MIP.

Ratings agency India Ratings & Research (Ind-Ra) said since the imposition of MIP, domestic producers have benefited by way of import substitution. Tata Steel managing director TV Narendran has said MIP has been "useful".

In the first quarter of FY17, total domestic steel production grew by 3.8% y-o-y, while overall steel consumption grew by only 0.3%. In the same period, imports fell by 30.7% y-o-y. "It's fair to say that domestic production growth has been a result of import substitution and not steel consumption growth," Ind-Ra said in its latest report.

While the government may consider the option of continuing with it for some more time, there is speculation that the list of products under MIP could be snipped. A call on this will be taken by the PMO after discussions with the ministries of steel, commerce and finance. "While the steel industry is arguing for an extension of MIP, the rollover would remain a formidable decision for the government," Ind-Ra said.

However, not all segments of the steel industry are in favour of MIP. It has been a blow to end user segments in the steel industry, particularly steel processing firms and process equipment makers, who have been strongly opposing it from the start. It makes steel more expensive for these firms.

Commenting on the extension of MIP, a steel industry executive said the more pertinent issue is to take steps to ensure a pickup in domestic steel demand. "Without an uptick in infrastructure and construction activity, steel demand would remain sluggish, leading to weakening of steel prices", the executive said.

Steel majors are also pinning their hopes on a post monsoon perk up in demand led mainly by rural areas.


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