1. Strict norms for state-run companies purchase of local steel

Strict norms for state-run companies purchase of local steel

The steel ministry has come out with strict norms for compulsory procurement of domestically-manufactured iron and steel products by the large public-sector buyers like the railways.

By: | New Delhi | Updated: July 4, 2017 6:31 AM
Value addition shall be the difference between the net selling price of a steel manufacturing unit in India and the landed cost of imported input-steel.

The steel ministry has come out with strict norms for compulsory procurement of domestically-manufactured iron and steel products by the large public-sector buyers like the railways. According to the directions issued by the ministry under the policy approved by the Cabinet in May, for every project with steel use above Rs 50 crore, the state-run agency concerned will have to submit an annual declaration on the extent of compliance and reasons for non-comliance, if any, in the preceding year.

The steel ministry has also stipulated that all future tender documents floated by the government agencies should explicitly spell out the qualification criteria for adherence to 15% value-addition within the country. Value addition shall be the difference between the net selling price of a steel manufacturing unit in India and the landed cost of imported input-steel.

The policy, however, won’t apply in cases where the existing procurement is governed by external funding agencies. “The objective of the policy is to notify all iron and steel products which are (to be) procured by government agencies or government projects and not (those) for commercial resale or use in the production of products for commercial use,” the policy document had said.

The steel ministry has already notified 11 product categories including HR coil, CR coil and a variety of steel pipes and tubes under the policy. The product basket will be reviewed by the standing committee, headed by steel secretary, and amended in the future, if required. The mandatory value-addition will go up as and when the domestic industry raises its average manufacturing capability.

“The bidders who are sole selling agents of the domestic manufacturers of iorn and stele products are eligible to bid on behalf of the domestic manufacturers under the policy,” it said. In case iron and steel products are made using only domestic inputs, the invoices of purchases from the actual producers along with quantities purchased and other related documents must be furnished separately.

However, if steel is produced using a mix of imported and domestic input-steel, the weighted average of both shall be considered to ensure that the minimum stipulated domestic value-addition requirement of the policy is complied with. If only imported steel is used, the percentage of domestic value addition will be computed by deducting landed cost of imported input steel from net selling price (of the finished item) and multiplying the result by 100.

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