Restricting import of hot-rolled (HR) coils, along with the impact of rupee depreciation and the 5 per cent import duty on steel, may put pressure on the margins of companies in infrastructure, engineering and automobile sectors, industry experts said.
Free imports of HR coils had allowed the construction and automobile firms to stabilise prices of their products. Now with the imposition of licensing, the companies would miss the opportunity in getting HR coils at a competitive price and, moreover, the government’s move would increase their input costs. The higher prices of products would create an inflationary impact on these key sectors, user industry sources said.
The Directorate General of Foreign Trade issued a notification on November 21 that HR coils had been put under the ‘restricted’ import list. With this, the government intends to control the import of HR coils against specific licences to be issued by the authorities. Till now HR coils, which are used by the infrastructure sector for construction, machinery manufacturing industries and the automobile industry, could be freely imported by any agency.
“The introduction of such licences once again revives the ills of the licence control regime, negating the beneficial impact of deregulation. This puts user industries at the mercy of bureaucracy, as used to happen in the licence control regime,” the sources said.
“What is even more worrisome is the condition under which an actual user of HR coils will be granted an import licence by the government. It is feared that the government may seek a ‘no objection certificates’ from domestic manufacturers. This creates the danger of arm-twisting,” said sources.
The directive on HR coils follows the government’s imposition of 5 per cent duty on imported steel. With rupee depreciating from an average of about Rs 40 to a dollar to about Rs 50 to a dollar, steel imports have already become expensive by about 25 per cent. The additional 5 per cent duty has further jeopardised the profitability of the key industries.
