Under-invoicing by exporters is new worry for steel industry

Even as the steel industry is asking the government to fix a minimum import price, it is facing instances of exporting countries under-invoicing their consignments to pay lower duty. This has been happening particularly after the levy of a 20 per cent safeguard duty in September.

Korea, for instance, exported 64,913 tonnes of hot-rolled coil in October at $275 (₹18,425) a tonne, much below its domestic selling price of $420 (₹28,140) a tonne.

In fact, the country has shipped 4.83 lakh tonnes (lt) of HR coil at an average price of $224-389 a tonne between July and October. China, the world’s largest producer, consumer and exporter of steel, has consistently dropped its export price for India, from $385 a tonne in July to $311, and shipped out 2.64 lt in the four months ended October.

Despite undercutting prices, China could emerge only as the third best exporter of steel to India behind Japan (which shipped 4.77 lt) and Korea.

The Centre, while levying the safeguard duty of 20 per cent, felt any imports below $450 (₹30,150) a tonne would hurt the steel industry, sources said.

Sanak Mishra, Secretary-General and Executive Head, Indian Steel Association, said subsequent to the levy of safeguard duty some import consignments of over 35,000 tonnes have been assessed at CIF (cost, insurance and freight) price of $224-247 a tonne  from Korea in October.

“Prior to levy of safeguard duty in September, the average landed price of various consignments stood at $308 a tonne,” he noted in a recent letter addressed to Najib Shah, Chairman, Central Board of Excise and Customs.

Therefore, the import clearances at $224 a tonne in October raises questions on the valuation of these materials, which probably suggests an intent to avoid paying extra on safeguard duty by under-invoicing the imports, said the letter. Calling for early action, Mishra said besides having serious impact on domestic industry, under-invoicing imports could lead to loss of revenue for the exchequer.

Though the quantities exported by these countries are not significant, the import price becomes the benchmark for steel sold in the domestic market, said a steel company executive.

Caught between rising operational cost and surging imports, the domestic steel industry is struggling to survive and has turned out to be the largest bank loan defaulter.

In fact, a consortium of banks led by State Bank of India converted their debt into equity in Kolkata-based Rohit Ferro Tech, a manufacturer of ferro alloy used in steel-making. The debt was converted into equity under the RBI’s strategic debt restructuring norms which mandate that banks find a suitor to turnaround the company within 18 months.

Rohit Ferro Tech, which ran up a debt of ₹2,280 crore, recorded loss of ₹96 crore in the September quarter. Interestingly, it was the ninth consecutive quarterly loss logged by the company.

“With banks taking over the management of defaulted companies, they would soon be competing with the likes to Tata Steel and JSW Steel,” said another steel company official calling for quick action by the government.

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