The government’s policy to protect steel firms from cheaper imports is hitting user industries like GAIL by jacking up input costs by 27-46%. GAIL has said that if things do not change, it needs to be allowed to import cheaper steel.
Following complaints by GAIL, the government has warned local steel pipemakers like Welspun to refrain from ‘profiteering’ — if they don’t, it will allow GAIL and others to import cheaper steel pipes.
In an attempt to protect steel firms from imports, the government had, last year in May, come up with the Domestically Manufactured Iron & Steel Products (DMI&SP) policy which mandated local steel be used in preference to imports. Following this policy, and higher import duties, local steel producers also saw their margins rising.
A grievance committee headed by the additional steel secretary was set up as part of the DMI&SP, and GAIL has said that local pipe manufacturers are charging it Rs 1.2 lakh per tonne, which is 27-46% more than the last price it paid when it bought such pipes; during this period, it says prices for HR coils rose just 7%.
GAIL made this point while telling the committee that, of the 4.6 lakh tonnes of pipes it has procured, 1.7 lakh tonnes are being made out of local steel. GAIL has said “this will have serious implications on the entire economics of the project” and it has already decided to refloat one of the tenders. GAIL is procuring pipes for the 300-km Durgapur-Haldia section and 700-km Barauni-Guwahati section of various pipeline projects.
While pipe producers like Welspun have justified the price hike, the grievance committee has said these firms “should make efforts to reduce the price to realistic levels and not try and match the global rates”. These firms have been told to stop this practice which dilutes “the very spirit of the DMI&SP policy”; if they don’t fall in line, the committee will have no option but “to grant waivers” to GAIL and other users.