Products from concessional steel for MSMEs need to be fully exported todayheadline

Companies procuring steel at concessional rates under a special mechanism being finalised by steelmakers to support the micro, medium and small enterprise (MSME) sector will need to ensure that the finished products are solely for exports, people privy to the matter said.

The new mechanism, which would be operationalised after planned imposition of a safeguard duty on specified steel imports, would be extended to MSMEs and members of the Engineering Exports Promotion Council (EEPC), the people said.

“Discussions are on on the mechanism…It would be implemented once safeguard duty is imposed…This is being done to shield domestic consumers from rise in prices,” an official said.

This is not the first instance of the steel industry applying such steps. Earlier, too, a similar mechanism was put in place by steelmakers when the government had imposed a safeguard duty on steel imports.

The official cited above said the cost of concession will be borne by the companies themselves, and the government will neither subsidise nor monitor sales.

The Directorate General of Trade Remedies (DGTR) proposed a 12% safeguard duty on imports of certain steel products earlier this month to protect local companies from a surge in imports.

The special pricing mechanism has been negotiated under the Indian Steel Association (ISA) umbrella, said an official, adding that the proposed mandatory condition of exports is aimed at ensuring that concessional pricing beneficiaries do not sell the raw material in the local market.

While steel producers are keen on higher import duties, consuming companies fear the resultant higher costs would hurt margins, especially in export market, since global raw material prices would not firm up by a similar measure.

The proposed safeguard measures can increase domestic steel prices by up to ₹6,000 per tonne on hot rolled coil (HRC) according to India Ratings and Research (Ind-Ra). HRC is currently trading at around Rs 50,000 per tonne.

ICRA estimates India’s steel imports can halve to around 5 million tonnes per annuam (mtpa) or below due to the safeguard duty imposition. Steel prices account for around 60% of the production costs for MSMEs.

The EEPC has also reached out to ISA for creating a portal, which can facilitate trade between large domestic steel producers and MSMEs, including giving information on product prices.