Does the Indian steel sector need Minimum Import Price Index (MIPI)?

Import of cheap steel has proved out to be problematic for most of the economies in the world. This issue has been bothering developing nations the most. Steep anti-dumping duties have been imposed on the steel imports from Korea, India, and China which gain entry into the US market. Indian steel market has been stressed out. The domestic companies have protested loudly against the cheap imports. This has propelled the government to impose a minimum import price [MIP] on the steel imports which varies from $341 to $725 on 173 steel products per metric ton. This is being touted as a temporary measure.

MIPI has been brought into the picture only for six months from the date it was notified or until any further reforms are initiated. This would not be implied on the high-grade pipes that are usually employed for pipeline transportation in natural gas and petroleum industry. This is being referred to as a good move by the steel bodies in India. However, this is just a temporary measure in the sector that has experienced a setback.

The production of steel during April to January 2016 dropped to 75.66 million metric ton hinting a 1.8% decline in the production. At the same time, the import of steel rose by 24.1%. Aruna Sundararajan, the Steel Secretary has explained that this move would offer the domestic steel industry a breathing space in order to come back to operating as earlier.

The spurt of steel imports led to a decline in the price of commodities in the recent years. The surplus of 400 million metric ton of steel has put the steelmakers in the nation under stress. The move by India government is a boon and should be considered for long-term implementation rather than being treated as a temporary measure. Care was taken by the government not to impact the downstream users as there are several grades of steel that are not manufactured in India.

This move by the government will impact the advantage that the automobile companies have. Few export bodies believe that this move would lead to erosion in the segment of engineering exports. A compensatory mechanism is being sought by the government for the increase in the price of raw materials from the exporters who are distressed.

Indian steel industry has severely been affected because of the dumped imports from a plethora of sources. The impact of surging cheap imports would certainly be nullified with this move of imposing MIPI by the government. There has been an imbalance in the Indian steel sector because of the growth in the import of steel. The growth in import of goods is not considered to be healthy for any nation. It hits the domestic market segment badly and also burdens the economy. MIPI is a right measure that has been employed by the government although it is just temporary in nature. The governing bodies would come up with a solution to tackle the pressing problem in the future. As of now, MIPI is a boon for the domestic steel segment.

Originally published at www.ofbusiness.com.