Close on the heels of imposing import protection measures, India’s Ministry of Steel is seeking rationalization of input costs for domestic steel mills in line with international benchmarks to make the mills more price competitive, an senior ministry official said on Monday, August 22.
The ministry official said that input costs under review included energy and electricity costs of domestic steel mills, costs of imported coking coal and freight charges of the government-owned and -operated Indian Railways.
The official said that electricity costs faced by Indian steel mills were substantially higher by 20-25 percent compared to energy costs in most major steel producing countries like Japan, South Korea and China, and it would be illogical to expect Indian steel mills to be competitive unless their input costs were benchmarked to international costs.
As regards costs of transportation, the steel ministry has stated that, as per product classification of Indian Railways, freight charges for coal and finished steel products were the same, which went against the promotion of cost advantages for value-added products and that Indian Railways could rationalize freight costs which held a window for 14 percent savings in logistical costs of local steel producers.
The Ministry of Steel will also initiate a move to scrap the 2.5 percent import duty on coking coal as the levy is not justified when the domestic steel producers are 90 percent dependent on coking coal imports and there is only very limited scope for increasing domestic supplies of the raw material, the official said.