Bulk steel consumers like engineering goods exporters and others who use the alloy steel as raw material for making end-products meant for exports are set to get steel at a cheaper rate. Domestic steelmakers such as JSW Steel and SAIL have agreed to supply them steel at the same price at which they export.
“According to market sources’ report to SteelMint, the proposal has been given by steel mills to Engineering Export Promotion Council (EEPC), however other details regarding their procurement quantity on monthly/annual basis are still awaited.”
Though fluctuation in the rupee against dollar often oscillates, the export price remains around 5-7% cheaper than the domestic price. Though India is not a big player in the export markets, docking of steel products often make it mandatory for them to clear inventories.
Steel firms agreed not to charge premium to such bulk consumers at a meeting held in New Delhi in the presence of commerce minister Piyush Goyal, steel minister Dharmendra Pradhan, captains of the steel industry and engineering goods exporters.
Sources present in the meeting said the move came after a prodding by the commerce minister who insisted that the domestic steel industry should provide engineering goods exporters and others using steel as a raw material for manufacturing finished products meant for exports in order to make engineering goods competitive in the export markets.
However, those who will be using steel to make end products meant for the domestic market would not be entitled to the price benefit.
Engineering goods exporters often allege that domestic steelmakers charge them around 15% higher price for a product than the export price.
Experts say the steelmakers’ decision not to charge premium will be a win-win for both the user industry and the steel ministry. As the user industry would be tempted to buy from the domestic market, it would boost not just their capacity utilization, but also improve sales and rein the rising trend of imports.
An official statement, issued after the meeting, said, “Both the ministers assured the steel industry that ministries of commerce & industry and steel will make all efforts to ensure that engineering goods exports double in the next 5 years and reach USD 200 billion by 2030.”
How will it work?
Assuming imported HR coil price at $525/t CFR India, it will cost engineering exporters INR 42,700/t after paying a custom duty of 12.5%. Where as under above agreement, engineering exporters can buy steel from domestic mills at import parity (i.e. $550/t equivalent to INR 38,200/MT) against advance licence scheme.
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