1. Steel-user units worried over imposition of MIP

Steel-user units worried over imposition of MIP

Reckon that floor price would result in a spurt in steel prices

By: | New Delhi | Published: December 28, 2015 12:29 AM

Steel-user industries are worried over the impending imposition of the minimum import price (MIP) aimed at protecting primary steel producers from surging imports. They reckon that the floor price would result in a spurt in the prices by Rs 2,000-Rs 2,500 a tonne.

These units, which produce more than half of India’s total output of 91 million tonne mainly from imported semis, slabs and billets, contend that the proposed move to cover their raw material under the proposed MIP would take the wind out of their sails.

“This may also lead to heavy defaults on loans apart from the massive job loss, estimated at over 50 lakh in direct and indirect employment, and also could become a social issue,” said Prakash Tatia, chairman, Sponge Iron Manufacturers’ Association.

“A substantial number of the secondary units are already closed and the balance would be hurtling towards closure if the proposal to bring even the raw material for secondary units into MIP becomes a reality,” he said, adding that the curb in imports would give ample leg space for the major steel producers to capitalize on it.

Quoting a Bank of America Merryl Lynch report, Tatia said out of the total Rs 2.8 lakh crore NPAs in the steel sector, Rs 1.95 lakh crore is with secondary steel units and unorganised sector and thus, the move to save a certain segment of the industry would be the “death knell” for another crucial segment.

Process Plant and Machinery Association of India (PPMAI), which has its members like Larsen & Toubro, Thermax, Praj Industries and ThyssenKrupp Industrial Solutions (India) among others, said if the steel industry is favoured with so much of excessive protectionism, it will end up scaring away investors in other productive capital equipment as well as downstream MSME areas.

“Why steel sector alone is being taken care of and that too at the prospect of killing the downstream capital goods and MSME sector which are th    e backbone to “Make in India theme? There will be confusion and disruption if any arbitrary price is fixed with the imposition of MIP. Furthermore will the domestic industry be also asked to follow those prices?” asked  VP Ramachandran, secretary general, PPMAI.

Sources said that the introduction of the MIP is awaiting approval from the finance ministry and implementing the move would act as a strong barrier for imports from China, Japan and Korea.

Another source said the delay in taking the “historic” move as the government is in a serious dilemma whether to protect the interest of the consumers or the industry which employs 7 lakh people directly and another 20 lakh indirectly. Consumers’ right to get steel at a cheaper rate could also not be just avoided.

Tags: Steel
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