Govt's MIP decision may not be enough to support steel industry

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26 Aug, 2025 12:21

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Sidhartha Shuklamoneycontrol.comGovernment of India extended the minimum import price (MIP) on 66 items as opposed to 173 items earlier for a period of two months.

This may not provide adequate support to the already debt burdened and ailing steel industry but has provided some breathing space to them for the next couple of months.

Siddharth Purohit of Angel Broking points out that if MIP been extended for one more year, then it  would have made some difference, now  the government needs to figure out what happens after October, as when this protection goes away, the domestic player will lose advantage and dumping will again start.

Listed steel companies did react to this news and saw marginal rallies on the stock exchange the day of the announcement:

India's steel industry has been suffering from the fall in steel prices worldwide as it has not been able to match up with the cheap imports coming from China, Japan and South Korea.

Top steel players in the nation -- SAIL, Tata Steel, JSW Steel, Essar Steel -- have reached out to the government for implementation of protectionist measures on the cheap import of steel.

A Fitch report had said that MIP is unlikely to take the burden off steel industry, it views it as stop gap measure and sees anti-dumping duty to be a long term solution. (Note: After this story was written, the government imposed anti-dumping on hot-rolled steel products from six countries.)MIP has no immediate impact on the bottom-line and reduction of the debt because of the lack of domestic demand. Companies have not been able to off- load the inventory they had bought at higher prices when the banks were lending heavily on the back of an expected economic and infrastructure boom (due to monetary stimulus) that that never came post the global recession in 2008, a source from the industry said.

A spokesperson from Essar Steel said,"The industry has sought extension of MIP as the global steel situation is still under excess capacity pressure."Banks to hurt too if iron and steel industry falters

The iron and steel industry has been the major contributor to the country's non-performing assets (NPAs) and as per Steel Minister Chaudhary Birender Singh, the industry has an outstanding loan of around Rs 3 lakh crore.

The cash flow position of some of the steel companies improved after the implementation of MIP but that was not enough to improve the debt status or lead to any upgradation in these companies. So, MIP was not enough to convert them from NPAs to standard loans, there has been some improvement but not enough to support their operations, says Purohit.

On a positive note, most of the banks have recognised the NPA accounts from the steel sector, hence from now there won't be large accounts falling into NPA from this industry, he said.

However, from the banks perspective a major recovery is not expected from steel industry, he added.

As per the corporate debt restructure (CDR) till June, 2016 the aggregate debt of the iron and steel industry stood at Rs 52,190 crore.

According to RBI's FSR report, a macro stress test of sectoral credit risk revealed that in a severe stress scenario, iron and steel industry (which had the highest GNPA ratio at 30.4 per cent as of March 2016) could see its GNPA ratio moving up to 33.6 per cent by March 2017.What can be said as a side effect of NPAs, companies that have defaulted on their bank loans are now dropping their prices to capture market share as they do not have to pay taxes nor do they have to provide for depreciation, says a Business Standard report.This poses as a threat to efficient steel producers and small players that are expanding capacities and bearing huge interest costs.

This support from the government to steel manufacturers has received some flak from automobile companies, equipment makers and bodies like Engineering Exports Promotion Council (EEPC), who say that moves like the MIP makes their main raw material, steel, costly which in turn hits their revenues.Going forward

In the coming days the scenario for the steel industry may not look so bleak as the Indian government seems to be committed to ensure the well being of domestic manufacturers with the push on infrastructure local demand is expected to improve.

In an interview with CNBC-TV18, Steel Minister, Chaudhary Birender Singh said, "MIP is for 60 days that doesn’t mean that it is for 60 days. During these 60 days we would be applying our mind for other products which can be made part of that if we want that it should extend for six months. So, that is why this is a stop gap arrangement in a sense."

The implementation of the Goods and Services Tax (GST) Bill is viewed to be a positive for the industry in the long term.

"It should have a multiplier effect on the Indian economy and will create a demand push for steel as well. The removal of inter-state tax is a significant decision of the government. We expect the impact of GST after couple of years of roll out," the Essar spokesperson said.

In last week's revision, the government may have reduced the number of items under MIP but it plans to bring more  products to the anti-dumping list which will safeguard the domestic industries in the long term.Follow @shukla_05sid