Global Steel Trade; Structural Problems and Future Solutions

1.8
Private Sector Response
Industry reaction to the SAIL bailout has been
mixed. Private companies, including TISCO, are
expected to ask for similar treatment.
Others have criticized the government’s bailout of
SAIL. The most vocal has been Indofer, an
association of private steel producers including
Ispat, Lloyds Steel, Essar Steel, and Jindal Steel.
According to these companies, “The government
decision to waive steel development fund loans is
highly discriminatory and will put the company
[SAIL] above the other major steel producers in
the competitive market for financial resources.”
The government’s intervention may help SAIL
not only maintain production, but increase it as
well. SAIL faces intense domestic competition
and needs to deal with mounting inefficiencies.
This bailout largely obviates any motivation for
SAIL to take the painful steps of downsizing
and consolidation. As such, the bailout is not
expected to help SAIL get back on its feet in the
long term. 166 For the most part, private sector
companies have generally refrained from harsh
criticism of the bailout. Many of these
companies maintain similarly high debt loads
and may, themselves, seek similar kinds of
government assistance. 167 Some industry
groups, however, have been vocal in their
opposition (see box). 168 Import Barriers,
Old and New
Metric Tons (millions)
1.7
1.6
1.5
1.4
1.3
1.2
1.1
1
0.9
1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: CMA India.
Total Imports
Minimum import
prices introduced
December 1998
6-14. Indian Imports of Steel, All Products
In late 1998, as the threat of
low-priced imports increased,
the government did not shy
away from imposing temporary
import measures to protect the
domestic industry. These
measures, along with existing
import barriers, have
contributed to a decline in
imports of almost 35 percent
from FY 1995 to FY 1999,
bringing imports down below 5
percent of domestic
consumption in FY 1999 169
(Chart 6-14).
Import Floor Prices. The most
notable government intervention was the imposition of a minimum floor price regime for steel imports. At
the urging of the Ministry of Steel, the Ministry of Commerce in December 1998 specified floor prices for
import of hot-rolled steel coils, cold-rolled steel coils, hot-rolled sheets, tin-plates, electrical sheets and
alloy steel bars and rods. Imports of hot-rolled steel coils, for example, were allowed only if the minimum
customs value was at least $254 per MT. 170 According to the Joint Plant Committee, “the basic purpose of
[the] imposition of [a] floor price was to safeguard against dumping of steel at low prices due to [the]
surplus scenario in [the] international market.” 171
Minimum prices on steel were withdrawn in January 2000 for primary products (excluding secondary materials
such as scrap). However, domestic producers took the government to court, and the Calcutta High Court ruled that
withdrawal of the minimum import prices was “not in the interest of the domestic industry.” Thus, in February,
minimum import prices for primary steel were reinstated. 172 While the Indian government is trying to reverse this
ruling in the Supreme Court, pressure is mounting from domestic industry to leave the measure in place. The U.S.
government is currently reviewing the consistency of this action with India’s obligations under the WTO. 173
168 Global Steel Trade: Structural Problems and Future Solutions