A periodic revision of the floor prices may be made mandatory soon, to ensure that the import prices are adequately reflective of the prevailing international prices of steel. A strong case also exists for withdrawing the floor price altogether for steel items that are scarce at home, like tinplates and electrical sheets.

The Director General of Foreign Trade (DGFT), which took the unprecedented step of fixing a price barrier on six items of steel imports in mid-December, had a tete-a-tete with all the aggrieved segments of industry last week. The Union steel ministry has also been listening to steel importers, like cold rollers, pipe-makers and container makers, who have been hit by the hike in the cost of imported raw materials.

The floor price, which was intended to be an anti-dumping measure against cheap steel from overseas,has hit many industries, including steel makers dependent on imported intermediaries. Cold rolled steel makers, for instance, have been hard hit by the higher cost of imported hot rolled coils.

A five per cent drop in steel prices worldwide has made imported raw materials subject to the floor price, considerably more expensive. The floor price consequently, becomes a starting disadvantage for exporters, dependent on imported inputs like cold rolled non-oriented (CRNO) sheets.

On December 10 and December 11, the DGFT had notified floor prices first, for defectives and then for prime grades of hot rolled coils, cold rolled coils, hot rolled sheets, tinplates, electrical sheets, plates and alloy steel bars and rods (hot rolled in coils.) The floor prices were a three-monthly average of export prices of European and Japanese steel mills.

The Union ministries of steel and commerce are known to have relied on the Metal Bulletin on steel prices listed between May and July, last year. The downtrend in steelprices first evident eight months ago, continued unabated.By December the same Japanese and European steel mills were selling steel, considerably below the July price. The floor price for prime grades of hot rolled coils, for instance, was pegged at $ 302 per tonne, based on the May to July rates of overseas steel mills.

In December the European and Japanese exporters were already shipping out hot rolled coils at close to $ 250 a tonne, which is closer to the price band fixed for defective hot rolled coils by the DGFT. There is a growing consensus within the Government now, for a more dynamic floor price, subject to periodic revisions, so that it stays abreast of prevailing international rates.