Imported Steel Will Subject to Increase in Value in Indian Market

Indian Express said that in an effort to provide more benefits to domestic producers in government procurement, the Department of Steel has introduced a notice that requires imported steel to expose higher domestic value added when making a product that would be eligible for purchase by government departments, including government firms. And unlike previously, when minimum value added criteria were introduced for purchases of Rs 50 crore or more in rupees, the new rules from May 29, 2019 lowered the threshold for purchases of Rs 25 crores or more in rupees. In addition, these provisions will also apply to government agencies whose annual purchases of iron and steel products for various projects amount to Rs 25 crore or more.

Whereas previously domestic content was capped at 15% on all 11 products, the new 49 product list has a minimum prescribed value added of 15 to 50%, making it difficult for imported steel to compete with local bidders on government contracts.

For cast iron and steel products, “manufacturers /suppliers that do not meet internal value-added targets are not eligible to bid.” Value added is the difference between the net selling price and the cost of imported input steel at a manufacturing plant in the country. The May 2019 notice also includes on the DMI & SP list a list of 13 capital goods that are used to produce iron and steel products with a minimum internal requirement for value added of 50 percent.

In such EPCs, purchase preference will be given to local bidders if their quoted price is within 20% of the price quoted for the relevant imported capital. In this case, the domestic buyer will have to match the price indicated by the lowest buyer and conclude a contract.