With steel imports likely to touch 15 MnT in fiscal year 2015-16, government expected to impose MFP very soon.
In a move to protect domestic steel industry from cheap imports, government is expected to announce minimum floor price (MFP) on steel imports. MFP is a set price below which imports would not be allowed in India.
Last week steel ministry of India sent a list, proposing MFP on 40 products under 14 categories to commerce and industry ministry. This list includes semi-finished products, shredded scrap, cold-rolled coils, hot rolled flat products, steel pipes, tubes, bars and rods among others.
Minimum floor price is equivalent to weighted average global price of the product or price before injury was caused, whichever is lower. Under this MFP system, although import prices may go down further all the duties imposed to arrive at landed cost of imports (customs duty, countervailing duty etc) will be calculated on MFP.
However the import of products meant as input for manufacturing of products for export purpose will be exempted from MFP mechanism.
Indian traders halt sales
With strong speculations of MFP on steel products, Indian importers have stalled their import purchases.
Due to influx of cheap imports, domestic steel companies had accumulated losses of INR 4,238 crore in the September quarter against profits of INR 4,647 crore profit in the same period of previous year. India’s total steel imports are expected to touch 15 MnT mark which was 9.31 MnT in 2014-15 and 5 MnT in 20.13-14.
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