Shortfall in steel production continuing’

Mumbai: The Cold Rolled Steel Manufacturers Association of India has said domestic steel production has been lagged behind consumption and demand for the last three years.

In a statement on Friday, Mr S.C. Mathur, Executive Director of the association, said as per Joint Plant Committee (JPC)/Ministry of Steel data, shortfall in production resulted in shortage of both long and flat steel products.

The trend has continued through the current financial year and while production in April-May 2007 rose 8.8 per cent, the apparent consumption increased by 11.6 per cent. Besides, the actual consumption of flat products in 2006-07 as per the JPC data was over 23 million tonnes, despite shortages and high prices and that the actual demand was much higher than 19 mt.

The industry and the construction sector had been representing to the Government to adopt effective measures to increase steel supply from either domestic sources or imports.

Duty free scheme

Also, there was no loss of revenues because the DFIA (duty free import authorisation) scheme targeted small and medium scale engineering enterprises, which generated far more revenue after consuming the imported raw materials by way of payment of central excise and other taxes. These enterprises were unable to source raw materials. Moreover, if not for the scheme even imported raw materials would be out of their reach.

Domestic price

Mr Mathur said though India was ranked as the cheapest producer of HR coils, domestic prices were the highest in the world. Due to shortage, prices were being jointly fixed by five major producers on a monthly basis by adding average ocean freight of $50 per tonne plus Customs duty of 5 per cent and port charges to the spot global f.o.b. prices.

The current domestic price of Rs 27,800 per tonne, excluding all taxes and duties for HR coils, or $660 per tonne was higher by $140 per tonne vis-À-vis the spot global prices of $520 per tonne f.o.b. The major producers have been enjoying a high margin on domestic sales, he claimed.