Steel floor price to be slashed

Sources said the commerce ministry is taking its own time to take a decision on the issue in view of the February 22 controversial article of the former advisor in the finance ministry, Mohan Guruswamy.

Incidentally, commerce minister Ramakrishna Hegde said the other day that his ministry is not going to reduce the floor price as demanded by the cold rollers.

Even before the publication of the Guruswamy article, thesteel ministry had put forward two separate proposals on HR coils floor pricing following a fall in the global market price of the item. When the floor price was fixed at $302, the international market price was ruling at $200 per tonne. Later it fell to $170-175. Considering the fluctuations of HR coils prices in international markets, the steel ministry felt the floor price needs to be reviewed periodically.

The first proposal of the steel ministry, sent by a joint secretary to the commerce ministry on February 2, suggested that the $302 floor price be used only for calculating the customs duty.

HR coil producers argued that the fixation of reference prices only for working out customs duty is not going to help stem the flow of cheap imports. For it will only marginally increase the landed cost of imports.

Moreover, they argued, the current domestic demand for HR coils is only five million tonnes (mt), which is much lower than the indigenous production capacity of 8.1mt. In addition, another 2mtcapacity of HR coils will be added in 1999-2000. Therefore domestic availability is more than adequate to meet domestic demand, they argued.

Pointing out that domestic demand for HR coil will go up to 6.2mt in 2001-02, while that for CR coils and sheets will go up to 3.4mt, sources said there will be no shortage of domestic HR coil supply. Of the 28.7mt total demand for finished steel, the share of all flat products will be around 15.2mt.

As regards the reference prices of CR coils and sheets, HR coil producers like Steel Authority of India Ltd (SAIL), Ispat Industries Ltd and others pointed out that the demand of the automobile and household appliance segments, coming in specific sizes and grades that are not made in the country, is required to be met through imports from Germany, Japan and Korea at c.i.f. prices ranging from $410 to $614 which is much above the reference price of $392.

Only the import of defective CR coils/sheets (about 40 per cent of the total import), which has been taking place atvery low c.i.f prices, will be restricted through this measure.

Faced with stiff opposition from the HR coils and sheets producers, the steel ministry sent to the commerce ministry an alternative proposal on February 19 which suggested that the floor price be reduced by around 10 per cent subject to periodic reviews.

Although both HR and CR producers are yet to come out with any official statement, sources indicated that they are coming closer to the February 19 proposal of steel ministry.

Interestingly, they pointed out, even after the introduction of floor price, sales of HR product in Indian market had gone up to 3,13,000 tonnes in February compared to the previous month’s 1,77,000 tonnes, and Tata Iron & Steel Co (Tisco) was the major beneficiary.

Tisco’s sales went up from 70,000 tonnes in January 1999 to 1,03,000 tonnes in February, SAIL’s from 55,000 to 80,000 tonnes, Essar’s from 34,00 to 74,000 tonnes, Jindal’s from 28,000 to 31,000 tonnes and Ispat’s from 6000 to 20000 tonnes. Sales ofLloyds Steel, however, stagnated at 5,000 tonnes.