The Indian Steel Association (ISA), a body of top domestic steel producers like Tata Steel, Essar Steel, JSW Steel, JSPL and Steel Authority of India, has urged the government to rein in growing imports of higher grades of steel in the guise of base grades of steel that are exempt from a 20% safeguard duty which has led to significant duty evasion in the last three months.
The imports of this particular variety of steel, API 5L-Grade B, have surged over 150% over the last three months ever since the safeguard duty became applicable. The imports have surged to around 60,000 tons in January 2016 from 23,000 tons in November 2015, according to trade intelligence. During this period, price of this grade of steel went down by over $70/ton from $383/ton to $318/ton now. Incidentally, there was no import of this grade in September 2015.
In order to contain surge in imports of HR coils, as per the petition filed by the domestic steel industry, the government had levied a provisional 20% safeguard duty on hot rolled coils (HRC) above 600 mm. However, the ISA has alleged that there has been duty evasion of around Rs 50 crore through the import of commercial/base grade structural HRC of grade IS 2062 in the garb of (American Petroleum Institute) API 5L grade, used for manufacturing pipelines for the petroleum and oil industry.
Incidentally, the base grade IS 2062 and API 5L grade B have similar chemistry and end- use applications and are commercially substitutable. Since the domestic steel industry had excluded API grade steel in its petition, it is exempt from the safeguard duty. This grade is also exempt under the Minimum Import Price (MIP) notified by the government last week.
ISA said it had apprehended this misuse and in a letter to Revenue Secretary Hasmukh Adhia, ISA's Secretary General and Executive Head, Sanak Mishra, had said such structural steel is likely to get classified in the guise of API grade, circumventing the provisional safeguard duty.
More importantly, it is posing a serious threat in terms of human safety due to improper use of API grade in engineering applications. In order to restrict such imports, the ISA has recommended that the government seek end-user certification, a copy of the API license and a copy of the recognised Third Party Inspection Report for imports of API 5LB hot rolled coils.
On February 10, ISMW reported that flat product-makers are keenly watching which way the market moves after hiking prices by Rs 1,000-1,500 per ton as importers trade in products which are not included within the scope of the minimum import price (MIP).
“We have to see how the market behaves. The MIP or the earlier safeguard duty has not covered one base grade steel – API5L B. This grade was imported by pipe makers. But, recently, imports of this grade have gone up and it is being imported by traders too,” said an industry source.