<b>XIII LOK SABHA DEBATES, <i> Session II (Winter Session) </i> </b>
XIII LOK SABHA DEBATES, Session II (Winter Session) Wednesday, December 8, 1999/Agrahayana 17, 1921 (Saka )

Title: Discussion on points arising out of the answers given by the Minister of State for Steel on 1.12.1999 to starred question No. 44 regarding reduction in import prices of steel items.

17.33 hrs.

SHRI SUNIL KHAN (DURGAPUR): At the outset, I would like to say that with reference to the earlier Starred Question No.44, dated 1.12.99, the Minister admits in his written and oral answers that the minimum import price has been reduced and the reduction of import duty has not affected the steel industry. It is a contradictory answer. Then, what was the necessity for fixing the floor prices?

In December 1998, the floor prices were announced. The average international export prices of certain categories of finished steel items were reported in the reputed and impartial international trade journal, the London Metal Bulletin. The prices as indicated in the LMB during the period May to July 1998 were used for computing the fair international export prices of European and the Japanese Steel Mills. Prices prevailing about six months earlier were used as import consignments and they usually take four to six months to arrive in India from those sources.

Now, I come to revision of floor prices. The Ministry of Commerce vide Notification No.31(RE-99)97-2002 dated 01.11.99 had reduced the reference price of a few flat items - both for prime, and second and the defectives. For example, in respect of the H.R. Coils the reference price prior to the Notification was US $ 302 per tonne. The reference price in the current rate is US $ 254 per tonne. The reduction is 16 per cent.

The reference price of steel of HR Sheets prior to Notification is US $ 317 per tonne and the current reference price is US $ 269 per tonne which amounts to a reduction of 15 per cent. The reference price of CR Coils prior to Notification is US $ 392 per tonne and the current reference price is US $ 351 per tonne, which is a reduction of 10 per cent. In the case of Alloy Bar and rods the reference price prior to Notification is US $ 740 and the current reference price is US $ 580 which is a reduction of 22 per cent. The basis of the reference price has been the average FOB price from non-dumping sources, namely European Mills and Japanese Mills during the last three months with an addition of 20 US dollars per tonne to arrive at C & F prices. However, the prices of HR Coils has been rising in the international market from April 1999 to August, 1999, at the rate of 22 per cent, on an average. When the international prices of HR Coils has gone up by, at least, 22 per cent in the last quarter over the price level in December, 1998, the current reference prices for prime varieties have been brought down by 16 per cent.

Sir, as a result of the Advance Licence Scheme, the Government is allowing export. That is why, the buyers are taking the advantage of lowering the import duty. Then, I understand that when they are exporting Salem stainless steel bars and sheets by ship, they are showing the standard quality as rejected, they get the shipment transferred to another ship in mid-sea and the same goods come back to India as second quality items. As a result of this, there is a loss to the exchequer. If it is found that they have not exported, you have the law to penalise them. But they can earn more money, by taking advantage of the Advance Licence Scheme, than the amount by which you penalise them for not exporting the goods. So, I would suggest that the Government should increase the import duty.

1740 hrs. (Dr. Raghuvansh Prasad Singh in the Chair)

In the case of SAIL, you are allowing the floor prices. Why are you allowing floor prices in the case of long products like joists, angles and T's. There is a heavy demand in the market. I think, SAIL has a monopoly in the market. In the case of such types of items, allowing floor price should be stopped. In the case of flat products, it can be reduced to some extent.

I would like to raise one or two points with regard to restructuring of SAIL which is pending for one year. You have given a bail-out package to to steel producers like ESSAR and ISPAT and others to the extent of Rs. 5,200 crore. But why are you not restructuring SAIL? If you restructure SAIL, then, they will produce more products by modernising the plant and will also export their products.

SAIL has already lost Rs. 1,574 crore. You have allowed Rs. 1,200 crore through the rebate system. If you reduce Rs. 1,200 crore from Rs. 1,574 crore, it will come to Rs. 374 crore. Why have you allowed rebate in the prices? I can give the figures. The landed cost in September, 1999 in the case of 12 mm. rod was Rs. 22,009 per tonne. In the case of HR coils, it was Rs. 14,923 per tonne. The landed price is higher than the domestic price.

I have a question to ask. It is widely complained that our stockyards are reluctant to sell small quantities of steel directly to the parties and allow middlemen to avail of discount on purchases through the blackmarket. What is the problem in direct selling of any quantity to any party on any day of the month? SAIL can make some trials by stopping billets with rebate from all plants for the next two months. They can examine the movements in the market and the cost of financial hardship for two months consecutively by keeping huge stocks at plant stockyards and also by grounding the stocks of SAIL. Why is SAIL not making any effort to pick up a particular product and offer it for sale for two months, watch the market and then determine the strategies? So, please the import duty.

SHRI BASU DEB ACHARIA (BANKURA): Sir, a question was asked on 1st December about lowering the floor price and the customs duty in the case of imports of steel. An anxiety was expressed by the Members because for a number of times, the floor prices are being reduced. The customs duty is also being reduced.

As a result of this, our domestic steel industry is adversely affected. But the Government is not admitting that our indigenous steel industry has been adversely affected. This was not the situation two years back. Why there is recession in the steel industry and this recession is not overlooked? Our per capita availability of steel is lower even when we compare with the developing countries also.

Another problem is that second rated steel is being dumped or being allowed to dump in our country. Although there is a law, no action is being taken by the Ministry of Commerce to prevent the dumping of steel in order to protect our indigenous steel industry.

Sir, regarding fixing of the floor price, I have said that there is no system and there is no transparency also. They do not know what is needed and what is necessary. Like the BICP, if there is an independent body which can look into all aspects of the industry in regard to fixing of floor prices of different qualities of steel, it would be better.

MR. CHAIRMAN : Please put your question.

SHRI BASU DEB ACHARIA : I know that only one question is allowed to ask.

May I know from the hon. Minister whether the Government consider a proposal to set up a body like BICP to determine the floor price of different qualities of steel? (b) In order to protect our steel industry, both public and private sector... (Interruptions)

DR. NITISH SENGUPTA (CONTAI): There is a joint plan committee to fix the prices.

SHRI BASU DEB ACHARIA : That he will tell us. There was also an expert committee which has also recommended. I do not know whether those recommendations have been implemented or not or whether the Steel Ministry is aware of that or not.

In order to protect our indigenous steel industry, both public and private, some concrete measures have to be taken. The patent answer that we get since the policy of liberalisation, which has been adopted by the Government of India since 1991, is that we will have to consider the international standard while fixing the custom duty. But that also should not hamper or harm our indigenous industry also. I would like to know whether some transparent system the Ministry will adopt while fixing the floor price and whether the Ministry will also take into consideration all the aspects relating to the problems of industry, the recession in the industry, the losses that have been incurred by the industry.

In order to protect our indigenous steel industry and also to prevent dumping of second rated steel from the advanced industrialised countries to our country, I want to know whether the Ministry of Steel is proposing or contemplating to take concrete measures.

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SHRI ANIL BASU (ARAMBAGH): Sir, the main problem is because of slow growth of economy and the demand of steel inside the country is also declining. But the fact remains that the import of saleable steel and steel scrap. ... (Interruptions)

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SHRI ANIL BASU : Sir, it is very much related.

The fact remains that the value of the import of saleable steel and steel scrap is continuously increasing. In 1994-95, we imported 19.36 lakh tonnes of saleable steel at a price of Rs.2,536 crore. The steel scrap was imported to the tune of 14.17 lakh tonnes and the value was Rs.758 crore. In the same year, we exported total saleable and other steel commodities to the tune of 24.52 lakh tonnes and the value was Rs.1,718 crore. That means, we have paid more for the import of saleable steel and steel scrap.

In the years 1997 and 1998, we imported 18.15 lakh tonnes of saleable steel at a price of Rs.2,900 crore. Steel was imported to the tune of 8.17 lakh tonnes for Rs.497 crore. That means, the total import was to the tune of Rs.3,400 crore and the export was Rs.2937 crore. So, there is a wide gap. We are importing at a larger pace. More money is paid for importing saleable steel and steel scrap and the export value is remaining at the same level though it has marginally increased.

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SHRI ANIL BASU : Now, the question arises, why the domestic steel industry is facing such competition?

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SHRI ANIL BASU : Sir, in reply to the Starred Question No.44, dated 1-12-99, the Minister of Steel has said that the Government of India has notified minimum import price for certain steel items in December, 1998. The prices so fixed were based on the average export price of these items from European Union and Japan, as reported in Metal Bulletin.

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SHRI ANIL BASU : Now, I am coming to my question. My question is that when a floor price was fixed after taking into consideration the London Metal Bulletin Price, why the standard has been changed now? Because of the change of standard, if the current LMB price of $ 260 per tonne is taken into account, then the minimum price should be $ 280. But it has been fixed at $ 254. Why?

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SHRI ANIL BASU : It is part (b) of my question. What action the Commerce Ministry and the Finance Ministry took on the recommendation of the Steel Ministry to reduce the excise duty?

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18.00 hrs.

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Why was the floor price fixed? Secondly, how does it benefit the domestic industry and to what extent? Thirdly, has any other country taken such a step to protect the industry?

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SHRI BASU DEB ACHARIA : The hon. Minister will complete his reply within five minutes. (Interruptions).

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