After the government decided to raise import duty from 7.5 percent to 10 percent for flat steel and from 5 percent to 7.5 percent for long steel products last week, Heavy Industries Minister Anant Geete went on record saying it would consider raising the duty further.
But in an interview with CNBC-TV18's Anuj Singhal and Ekta Batra, RK Goyal, MD, Kalyani Steel , explained why even a hike to 15 percent will not be enough to protect the domestic steel industry.
Below is the transcript of the interview on CNBC-TV18.
Anuj: Clearly 7.5 percent was not enough when we spoke to you and a couple of other industry players, would 15 percent be a good mark in terms of hiking import duty compared to the Chinese imports?
A: The price differential is 25-30 percent. As you have rightly mentioned, 2.5 percent hike does not mean anything. Even if it is increased to 15 percent, it may not make much difference and the imports will continue the way they are continuing. We are looking at a minimum differential of 25-30 percent by way of anti-dumping duty or safeguard duty so that these imports can be come and Chinese are not able to dump material in the country.
Ekta: Can you tell us what the prices of the domestic production is versus the imports right now?
A: Imported material is coming in between USD 350 and USD 370 per metric tonne and domestic prices are almost 25-30 percent higher than this.
Ekta: Ideally the import duty should possibly be hiked to 25-30 percent as opposed to a proposal of 15 percent then things would make a difference for you?
A: That is right and domestic industry as such is under very heavy stress and it should not happen that some of the units go beyond repair.
Anuj: When you say that domestic units are under stress if you could tell us the kind of financial stress that you are referring to?
A: You look at the results of last year and last quarter. Majority of companies have declared losses and most of the companies are heavily leveraged which is creating a bigger problem and further enhancement of capacities or continuing the operations because working capital funding also becomes an issue.
Ekta: What is the outlook according to you for domestic steel prices maybe in the next couple of months? Do you see maybe the gap widening between the imported steel prices versus domestic despite any incremental hike in import duty simply because global prices might be cut?
A: We are still hearing that there is a slowdown in China. Things are not improving in China but they like to continue production, which means they will be more aggressive in dumping the material. If they are dumping material and increasing quantities, even in India we will be under heavy pressure to reduce our prices further so that at least whatever market share we have, we try to maintain that.
Ekta: What kind of capacity utilisation are you working at in terms of your factories right now?
A: We are working around 70 percent capacity utilisation.
Ekta: What sort of inventory build up do you have?
A: Our inventory has gone up by almost 15-20 percent in last couple of months.
Source: moneycontrol.com
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