India would not rush to impose minimum import price (MIP) for steel to rein in the growing inward shipments from China, South Korea, Japan and Russia among others...
India would not rush to impose minimum import price (MIP) for steel to rein in the growing inward shipments from China, South Korea, Japan and Russia among others, commerce and industry minister Nirmala Sitharaman said on Friday, dashing domestic steelmakers’ hopes for early implementation of the trade action.
Talking to reporters after the first meeting of council for trade development and promotion, Sitharaman said, that there had been a lot of consultations with the steel and finance ministries on the issue and a fairly good amount of groundwork was done.
“However, any talk of MIP will not have to be restricted to one or two lines, but may be several. But at this stage, we are not rushing into it,” she said.
The steel ministry had been strongly pitching for the imposition of MIP for quite sometime now following repeated representation of the domestic industry. However, the commerce ministry, it was learnt, was not in favour of such a move that has the potential to inflate illegal trade and generation of black money.
The fact, however, remains that the domestic steel industry is bleeding due to the triple whammy of cheaper imports, subdued demand and lower price of the alloy. This has forced companies like SAIL, Tata Steel and JSW Steel utilising their capacity at a much lower level. The average operating EBITDA margin of the steel firms have come down by around 40% during the first half of the current fiscal compared to a year ago period.
“Indian steel industry’s capacity utilisation is falling continuously, replaced by predatory priced imports. Several countries are taking expeditious remedial measures leading the surplus steel also coming into India. Any further delay in government intervention to impose immediate and effective trade actions, will further aggravate the situation,” said JSW Steel’s commercial director Jayant Acharya.
The further drop in prices during the second half of the current fiscal is likely to result in further decline in the remaining quarters of the current fiscal. Faced with a staggering debt of over Rs 3 lakh crore, domestic steelmakers on Thursday sought a comprehensive steel package from the government, including a one-year moratorium on payment of interest and principal amounts.
“Due to surging imports and loss of EBIDTA, working capital of the Indian companies have come down. Overall, the profitability of the whole Indian steel sector has taken a huge hit. This will eventually lead to crippling of operations and to default in industry’s obligations to banks,” said an Indian Steel Association (ISA) official.
Sensing that the price and import pressure is likely to continue till 2017, the steel ministry had recently, in a presentation to the PMO, said that there was a need to raise customs duties on steel and urged steel to be excluded from future free trade agreements and RCEP, which includes China.