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India to withdraw floor price for some grades of steel

MIP helps set a floor price, which does not allow steel imports below this price

business Updated: Apr 26, 2016 12:05 IST
Timsy Jaipuria
Timsy Jaipuria
Hindustan Times
steel imports,support price,WTO
Working a blast furnace in a steel plant(REUTERS)

The government may withdraw the minimum import price (MIP) on certain grades of steel before the expiry of its term on August 5, to prevent a backlash from exporting countries at the World Trade Organisation (WTO). The Centre is also of the view that the move to impose the MIP have failed to curtail domestic imports, which actually rose 20% to 11.2 million metric tonnes in 2015-16, as buyers took advantage of lower prices after an economic slowdown in China prompted the world’s biggest producer to flood global markets with cheap products.

A decision is likely to be taken in the review meeting in June, sources said.

MIP helps in setting a floor price, which does not allow steel imports below this price.

The government had, on February 5, decided to impose a minimum import price ranging from $341-752 per tonne on 173 categories of steel products to provide relief to domestic producers against cheap imports. The MIP was initially imposed for six months, with a condition of review after every two months. In its first review meeting earlier this month, the government decided to continue with the MIP.

“With imports showing no signs of decline, it would not be wise to continue with the measure for a longer duration. Also, imposition of MIP can be challenged at the WTO as a trade distorting measure. We will watch the situation for another two months. MIP in an ideal situation should lead to a decline in imports. If it does not happen, the government will be forced to rethink,” two sources familiar with the development said.

The development for pre-mature withdrawal of MIP comes at a time when the steel industry is seeking additional measures to check a surge in imports, particularly from China, Japan and Korea. In fact, the stainless steel sector was expecting the MIP list to be expanded to include at least a few grades of stainless steel products.

“We have asked ministries and stakeholders to seek imposition of WTO-compliant checks, such as safeguard duty and anti-dumping duty, if the interest of the domestic industry is being harmed by a surge in imports. Already safeguard duties on certain products have been extended. Minimum import price was an extraordinary measure to control an extraordinary situation and it has to end sooner than later,” another official added.

Steel imports rose last month to 994,000 tonnes, 18.2% higher than the year-ago period, according to the steel ministry. The sector has already been under stress due to stagnant demand and rising debt burden. In fact, the steel sector is among those with the most stressed assets.

”The government should continue with MIP for the six-month period as announced. We are just concerned about the challenges the domestic industry is facing, which need to be addressed,” said Sanak Mishra, secretary-general, Indian Steel Association (ISA).

First Published: Apr 26, 2016 12:05 IST