Steel imports continue below MIP levels, complain producers

Total imports in April-June were 1.75 million tonnes, of which 69 per cent were below MIP levels

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It's almost six months since the government imposed a minimum import price (MIP) of $341-752 a tonne on certain steel items but imports continue at prices lower than these, alleged the industry.

According to figures compiled by IBIS, a data collection agency cited by the industry, total imports in April-June were 1.75 million tonnes, of which 69 per cent were below MIP levels.

"MIP has been circumvented, either by extending LCs (letters of credit) or through imports under the Advance Authorisation Scheme and then regularising these with the licensing authorities through nominal interest payment, thereby avoiding the need to export. Exports, as we know, have dropped," a producer said.

The issue is likely to be taken up by producers at a steel ministry meeting on Thursday to discuss the MIP regime, which is scheduled to end next month.

In the case of hot-rolled coil, 550,000 tonnes have been cleared below the MIP, 70 per cent of total import. In the case of CRCA (cold rolled, close annealed), half the volumes have been cleared below MIP; for coated galvanneal, all.

Though MIP has helped stem volumes to a great extent (48 per cent in May 2016 compared to May 2015 and 22 per cent in June 2016 compared to June 2015), the amount of import below MIP levels has alarmed the industry.

More so as in the past two months, steel prices have softened by Rs 500-1,900 a tonne. At the moment, though the monsoon is a lean period, no one is vouching for a recovery in prices. Still, prices are higher by about Rs 3,000 a tonne since the government stepped in with a safeguard duty and then the MIP.

A surge in cheaper import from China and countries with which we've signed a free trade agreement had cause severe stress in the industry. As of September 2015, the sector accounted for 21 per cent of the total number of corporate debt restructuring cases. Its share in total stressed accounts of scheduled commercial banks was 10-11 per cent. That's when the government stepped in to protect the industry.

'We are not out of the woods yet," a primary steelmaker said. China is to cut capacity by 150 million tonnes but that target is to be achieved by 2020.

"The government should review the loopholes and investigate all cases of misuse, and make the MIP more effective," producers said. They added that import of API grade, out of the MIP ambit, had surged.