MIP could be revoked even before six months if domestic prices are hiked arbitrarily: Aruna Sundararajan, Steel secretary

By: | Published: February 9, 2016 1:35 AM

With import tariffs (including safeguard duty), freight and the newly introduced minimum import price (MIP), the landed cost of imported hot rolled coil (from China) is around `33,000-35,000/tonne now, as against domestic price (inclusive of all applicable taxes) of `26,000-27,000/tonne.

With import tariffs (including safeguard duty), freight and the newly introduced minimum import price (MIP), the landed cost of imported hot rolled coil (from China) is around `33,000-35,000/tonne now, as against domestic price (inclusive of all applicable taxes) of `26,000-27,000/tonne. This gives sufficient room for local steel companies to raise prices, but the government says it won’t allow them to hike prices arbitrarily and drastically. Steel secretary Aruna Sundararajan describes the rationale of the MIP on

173 products and the mechanism that will be adopted to rein in imports that could unfairly harm local production, in an interview with FE’s Surya Sarathi Ray. Excerpts:

What prompted to you revisit the mechanism of minimum import prices, that many would say, is out of sync with the concept of free trade?

There was an issue of cheap imports that harm the domestic industry. Before the decision was taken, detailed studies have been done as to what should be the appropriate MIP and how it could impact the user industries and which product lines have to be covered.

There were objections from the commerce ministry.

I won’t call it objection. They needed certain clarification on how the MIP has been worked out and whether all producer segments have been considered. They had sent us a few queries on how we arrived at various costs, the weightages given to different segments, the specific lines that need to be covered and the like.

What is the gap of current landed price of HR coil and MIP?

If you look at the HR coil, the landed price hovered between $300-324/tonne in last few weeks. Now, the MIP for the product has fixed at $ 445/tonne.

Thanks to the MIP, steelmakers raised prices by up to `1,500 per tonne with effect from Monday. Do you think steel prices will go up even further in the coming days?

We have communicated to the steel industry that this measure (MIP) is to provide a level-playing field. It does not mean that they can raise prices randomly and undermine other sections of the industry. We have said there should not be sudden and arbitrary price increases. We will keep a watch on the situation. At the end of two months, we will see whether the price increases they have brought about have been unreasonable and hit the downstream industries. If that (hurting the downstream industry) is the end result, we will of course review the whole price mechanism. The government, needles to say, can always revoke the MIP.

But, the MIP is for six months.

We have announced that the MIP will be valid for six months.

But, at the same time, we have said that we will review it after two months.

How would you stop over-invoicing by importers?

Basically, we have to keep a watch on the situation. If the MIP is $450 and they (importers) are invoicing at $450, but actually buying it a lower price of, say, $300, we have indeed to stop that. We are going to announce a mechanism for this. I can’t tell you the full details at the moment. But, it will be indexed to (price statistics) provided by agencies like Mysteel and Platts.

Don’t you think six months is too short a time to gauge the impact of MIP?

It is a reasonable period. In any case, this is an emergency measure.

Are you considering any other measure anytime soon to protect the domestic industry?

We have to wait and see. Safeguard duty is already there. Anti-dumping duty is more of a long-term measure. So we will look into the possibility of moving to a longer term measure. The MIP is an emergency measure.

Why only 173 products?

We went by a very strict formula where we said either there would have been a significant increase in the quantity imported or the quantum of imports. We have excluded categories where the imports are in small quantity or the price fall is less from the MIP purview. Every category has been analysed.

But is it not improving the efficiency of steel companies the real solution?

Studies show that six Indian steel companies are amongst the world’s top 20 in terms of productivity and competitiveness across a wide range of criteria. There are also published studies that say that barring Ukraine, India steel companies’ conversion rate i.e. the cost of conversion from raw material to steel is the best.

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