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Steel: The Govt. faces a dilemma

Aug 9, 1999

The Indian steel industry has started to clamour for increasing the minimum import price for steel products. This follows the rise in international prices of hot rolled coils. The government has been considering such a move for quite some time now. The Indian steel industry, which is recovering after a prolonged slump in demand growth, has been trying to dissuade the government from lowering the minimum import price of hot rolled coils. Although international steel prices have been firming up, the need to maintain a minimum steel import price arises from the fact that a lower floor rate could attract dumping into the country.

A decision to keep unchanged or increase the floor price would adversely hit the importers of steel. Also, a decline in floor price would adversely affect the integrated steel producers, which are as yet recovering.

The government's decision is likely to evoke a mixed response from the industry. However, the minimum floor price is unsustainable in the long run. Such floor prices lead to building up of inefficiencies and also imply higher costs for producers of value added steel products.

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