Nitin Gadkari last month said that he had sought PM Modi's attention towards 55 per cent hike in steel prices by players during the past six months, making projects unviable.
During the last two months itself, the prices of steel have increased six times
Miners’ body FIMI has urged the government to revisit its protectionist approach towards indigenous steel manufacturers and said that domestic players are taking “undue advantage” by fixing steel prices almost at par with the international level despite all the protection and incentives.
Union Transport and MSME Minister Nitin Gadkari last month said that he had sought Prime Minister Narendra Modi’s attention towards 55 per cent hike in steel prices by players during the past six months, making projects unviable. “In order to take undue advantage and profiteering, the integrated steel companies fix up the steel prices almost at par with the international steel prices despite all the protection and incentives provided to steel industry backed up with secured iron ore and other raw material supply,” Federation of Indian Mineral Industries (FIMI) Secretary General R K Sharma said in a letter to Principal Secretary to the Prime Minister P K Mishra.
“This Federation would therefore request the Government of India to withdraw import duty @15 per cent and other undue protective support provided to Indian steel industry,” he added. The Indian steel industry is well protected from international competition because of the 15 per cent import duty on steel as per Indian Customs Tariff, in addition to other protectionist measures, including minimum import price, antidumping and countervailing duties, Steel Import Monitoring System (SIMS), preference to domestically manufactured steel products in government procurement among others, Sharma said.
Any firming up of steel demand propels the steel companies to raise price of steel unabatedly. Since COVID-19, the steel industry has been raising prices of steel very frequently, he said. During the last two months itself, the prices of steel have increased six times which is unprecedented, the letter said. While working out the price of steel, the Indian steel industry takes international price as base whereas it gets high grade iron ore at comparatively much lower prices, either from domestic sources or captive mines.
At present, almost all the primary steel producers have captive iron ore mines where iron ore is available to them at transfer prices. Some of the primary producers of steel are exporting and selling iron ore in the open market. The consumption of high grade iron ore at lower than the international price, coupled with cheaper labour costs should give more and better quality steel at a competitive price.
“The domestic steel industry hides these vital information and reaps windfall profits,” Sharma said. With a view to reap windfall profits, the domestic steel industry fixes its products prices almost at par with international level. On the contrary, Indian iron ore prices are always much lower than the international prices. During the month of December, the domestic prices are cheaper to the extent of Rs 7,128 per tonne in comparison to international prices, it said.
Apart from the price advantage for domestic iron ore and depressed coking coal, there is lot of cushion in the formula for working out the price of steel. “The average grade of iron ore required by domestic steel industry is 63 per cent Fe against the world average of 60 per cent Fe. However, it uses 1.65 tonnes of iron ore per tonne hot metal (world average of 1.37 tonnes) which is abnormally high and has lot of scope to make windfall profits,” the letter said.