The fight between steel user and producer segment has gathered momentum with the latter asking for duties on the entire value chain of steel products. Seshagiri Rao, joint managing director and group chief financial officer of JSW Steel, explains the industry’s stance on unfair pricing of imported steel to Aditi Divekar. Rao talks about the immediate hike in product prices after safeguard duty imposition and why consumers should opt for costlier domestic steel. Excerpts:
There have seen a series of duties on steel products since June, but domestic producers are now demanding duty on the entire value chain. Earlier, they had taken the benefit of higher international price by raising domestic prices, so why are producers pushing hard for duty this time?
We are not against the fall in steel prices. We are complaining about the unfair price at which steel is coming into India. China is able to dump excess steel into the country because of the several incentives its has got from its government. Globally, fixed costs including taxes on steel comes to $7-8 per tonne. For domestic players, on the other hand it comes to about $41 a tonne. Interest rates in India are at 10-11 percent, while in China, South Korea and Japan, it is far lower. China has had several rounds of interest rate cut. In such a scenario, there is no level-playing field for domestic steel producers. Certainly, domestic steel players need protection for the industry.
After safeguard duty, domestic producers raised product prices by Rs 500-700 a tonne. Earlier, if imports were costlier, producers would raise prices saying international prices moved up. So, aren't domestic producers taking advantage either ways?
Global steel prices have declined by Rs 10,000 a tonne this year so far. The fall in Indian steel prices has also been of the same quantum. The upward revision in prices post safeguard duty was actually the price adjustment done taking into consideration the rupee-dollar parity. If producers had to raise prices only keeping the duty in mind, the price hike should have been by about Rs 4,000 a tonne. No domestic steel producer has raised prices to this extent post safeguard. Only because the revision came after the safeguard imposition, it looked as if producers hiked soon after duty.
Will the duty on raw materials such as hot-rolled coils not open door for finished goods to come into the country? Will the ‘Make in India’ idea not suffer because of this kind of duty structure?
Any item coming into India at an unfair price, whether finished or raw materials, should have a duty. Such imports, whether finished or raw material, will hurt the domestic market and hence action has to be taken against such inflows.
Domestic steel producers are selling at 20 per cent higher price than imported. Why should consumers pay more for the same product?
Price sustainability is an important factor that needs to be taken into consideration. Currently, imported products are available at an unfair price due to structural issues in China. The excess overseas capacity is bringing prices lower. If imports are allowed, the domestic steel industry will be finished. But imported prices are not going to remain at these levels forever. When pricing scenario overseas changes and moves to a point when domestic consumer cannot take it, there will be no domestic steel industry to come to its rescue. A long-term perspective has to be taken into consideration here. So the price sustainability factor is important.
Source: http://www.business-standard.com/