OPINION: Need to reduce import duty of 7.5% on steel imports to 5%

Author(s): 

Steel is very vital for our economy.  Unfortunately, this commodity is being managed so casually in the country that the manufacturing is getting adversely affected. Exports suffer due to irrational steel prices which are fixed arbitrarily.

The country has all the resources to produce steel, but unfortunately production of steel in the country is not taking place smoothly.  Due to illegal mining of iron ore there are mining restrictions in key states like Karnataka, Goa & Odisha. 

As a result the main responsibility of producing iron ore lies with NMDC.  Government has given additional charge of the Chairman of the NMDC to the Chairman of SAIL. If a competitor takes charge of fixing price of a raw material the competitors will be at a loss and the spirit of competition goes.   As a result the pricing of iron ore is getting irrational as SAIL would like to beat its competitors with the higher price of iron ore.  The prices of iron ore are falling down in the international market but they are rising in our country. Due to mining restrictions in Karnataka Supreme Court directed NMDC to produce 12 million tons of iron ore per year in Karnataka.  However, supplies from Karnataka have remained far below the monthly demand of 2.5 million tons. Similar position is observed in other places.  This also tends to push up their prices. 

I have urged the Central Government to ensure the smooth implementation of the Steel mining policy.  The secondary producers of steel are facing the worst position of iron ore prices which in turn affects the steel consumers.  Our steel producers sell steel on the basis of landed cost.  This means a reference price of steel in the global market is taken and expenses to bring that steel into our country are added to arrive at the steel price.  It is worth mentioning that India is exporting iron ore to other countries for steel production.  On the other hand, iron ore price is fixed differently for export and indigenous use.  This results in the escalated steel prices quite arbitrarily.  This makes out steel costlier by over Rs. 5,000 per metric ton than the global prices and this is affecting our exports adversely.

The steel demand in China, Europe and other countries is falling due to which steel prices are crashing in the international market.  In our country also the Index for Industrial Production (IIP) is falling.  Against this scenario our steel producers are always on the look out to increase steel prices.

Our secondary steel producers have another hurdle to face in their production of steel.  Steel Ministry has enforced steel quality control order under which the steel produced has to pass through the prescribed tests. 

Surprisingly, BIS which is the main body in the country to enforce prescribed test has refused to enforce steel quality control order.  Still Steel Ministry is persisting with this by fixing the responsibility of enforcement on Directors of Industries in States.

I have written to Prime Minister that this is a retrograde step going against the very spirit of economic reforms.  I have urged the Prime Minister to ask the Steel Ministry to withdraw this provision.

I have also urged the Finance Minister to reduce the import duty of 7.5% on steel imports to 5%.  The fluctuations in the exchange rates tend to make the import of steel costlier.

 

Date: 
Wednesday, November 21, 2012