VITAL INDUSTRY UPDATES – 27/04/2015

April 27, 2015 12:45 pm Published by

Coal block auction II: Ministry looking at ‘one group, one bid’ cap

In the next round of auctions, the Coal Ministry may cap the number of bids a corporate can make for a mine at one. If multiple bids are made, the best one will be counted.

In the first round of auctions, one group could not only put in more than bids but all or many could make it to the final list. Now, it will be just one bid from one group. Learning from the recently concluded first round of auctions wherein corporate majors made multiple bids for the same block through group companies, the Ministry is looking to tighten up the process.

Though the norms set a minimum number of bids for a mine to be put up for auction, they did not place any restrictions on multiple bids by one group.

Thus, for instance, Naveen Jindal’s Jindal Steel & Power Ltd (JSPL) put in multiple bids for same mines — Gare Palma IV/8, Jamkhani, Utkal C, Gare Palma IV/1, Gare Palma IV/2&3, and Gare Palma IV/7.

Aditya Birla Group and Sesa Sterlite used sister companies to make several bids. Players like Jaypee and Adani Power also followed the same approach.

“We did learn certain lessons and we want to ensure that there is no misuse of bidding norms… The government is not having ostrich-like approach and is open to improvement,” said a senior government official. The Coal Ministry is examining this aspect and will take a call soon, the official added.

For the mines auctioned till now, bidders were required to make a price offer at the technical bid stage itself. Only 50 per cent of those who qualified in the technical stage (subject to a minimum of five bidders) were allowed to participate in the financial bidding and were then ranked according to the initial price offering.

This clause actually helped the government as some mines that got single bids were taken off the block.

But it also resulted in limiting the competition. Now, if the government decides to cap the bids a company can make to one, it will open up the field for others.

In the first round, 33 mines/blocks were auctioned raising over ₹2-lakh crore. The government is now preparing for the next set of auctions and allotments. The number of blocks to be auctioned could be between 15 and 20. The total number of blocks to be offered will be around 35.

Parliamentary committee supports higher import duty on steel

A Parliamentary panel has agreed with a Steel Ministry proposal to the Finance Ministry on hiking the import duty on steel, to provide relief to the domestic industry.

The report of the Standing Committee on Steel and Coal, tabled in the Lok Sabha on Friday, said that the ‘damp trend’ in the domestic steel industry has been accentuated by dumping of cheaper steel from CIS countries.

China imports surge

Similarly, imports from China in April-January 2014-15 rose to 2.9 million tonnes from 1.08 tonnes in the previous fiscal year.

Year-wise import-export data of steel show that in 2014-15 imports were at 9.32 million tonnes compared with 7.93 million tonnes in the previous year.

Serious challenges

“It is understood that the steel sector is facing serious challenges on account of excess steel capacity in the world, leading to a huge surge of imports in India. The Committee fully agrees with the proposal of the Steel Ministry and desires that all possible steps, including … revising import duty on imported steel goods, should be taken by the Steel Ministry with the Finance Ministry at appropriate levels,” the panel report states.

The panel also criticised the lack of research and development in the steel sector.

It recommended more research and development (R&D) facilities to develop indigenous steel, which can be used by the power and automotive sectors.

“The Committee is constrained to note that steel for the power and automotive sectors is being imported, involving outflow of foreign exchange, owing to non-availability of such facilities in the country,” the panel’s report noted.

Responding to the Parliamentary committee’s concerns, the Steel Ministry said that it was in the process of creating a body with a ₹100 crore contribution from the Central government and ₹100 crore from the steel industry to boost R&D activities.

India may export Basmati to China

 INDIA is likely to commence exports of Basmati to China this year. Rice-shelling and exporting units certified by the National Plant Protection Organisation (NPPO) as being infestation-free may be allowed to ship the aromatic rice to the neighbouring country.

Exporters are targeting the Indian and Middle Eastern communities there, besides the Chinese, who are now trying out different cuisines despite their traditional preference for stickier, short-grained rice.

“By June 30, the government will send a list of credited rice mills with the NPPO certification stating that they are free from ‘khapra beetle’ infestation. After this, we expect Chinese companies to start placing orders,” a senior official of the rice exporters body said

 

According to millers and company executives, trade enquiries have started coming. “China has also invited Indian rice exporters to study the market,” said an official of All India Rice Exporters’ Association.

 Other new markets, including South Africa and Mexico, are being explored to augment Basmati exports.

At present, Iran, Saudi Arabia, Iraq, Kuwait and the UAE are the major export destinations for the long-grained rice.

 India exported around 3.2 million tonnes (mt) for the entire financial year to March. This was considerably lower than the 3.75 mt exported in FY14.

 “It might take us a few years to penetrate China, but the country has the potential to become a big market for Indian Basmati due to its huge population, increasing income levels, and openness to try new cuisines,” said a rice exporter.

Steel imports up 71 pc in FY15

 INDIA imported 9.32 million tonnes (mt) of steel items in FY15, up around 71 per cent year-on-year—the highest volume of imports in the past five years.

However, the export of steel items dropped 8.1 per cent to 5.5 mt during the fiscal, according to data released by the Joint Plant Committee.

The production of finished steel was up 3.3 per cent at 90.55 mt, while consumption stood at 76.35 mt, indicating a 3.1 per cent increase.

 

According to a senior analyst of ICRA, the lower landed cost of imported steel items was responsible for this surge in import. “The price differential was because of higher domestic cost of production. Internationally, reduction in iron ore prices has been much more prominent than that in the local market during the previous year. This was one of the factors contributing towards higher cost of production,” he said.

 

The price of Chinese hot- rolled coils (HRC) currently rules at around $ 370 per tonne, resulting in the landed cost of imported steel (at port) being cost-effective by almost $ 89 a tonne compared to the prevailing domestic steel prices.

In the last one year, iron ore prices in the international market have dropped by $65 per tonne, going from around $115 a tonne in April 2014 to around $50 a tonne at present. On the other hand, the domestic price reduction was just around $9 a tonne. “This imparted cost advantage to international players by almost $90 a tonne in steel making, since each million tonnes of steel requires around 1.6 million tonnes of iron ore”, the analyst pointed out.

 

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