Senior officials of steel companies have strongly criticised the Government for failing to check cheaper imports coming into the country despite the imposition of floor prices.

Industry sources said the floor price mechanism has failed completely as, over the last month, at least three large traders based in Mumbai, through over-invoicing, have imported large amounts of hot-rolled and cold-rolled coils at prices far lower than the floor prices.

They point out that two traders have imported hot-rolled coils from Australia and South Africa at $155 per tonne and $170 per tonne respectively against a floor price of $302 per tonne and $232 per tonne for seconds. A third has shipped in cold-rolledcoils at $210 per tonne against a floor price of $392 per tonne.

The steel industry, grappling with low demand, falling prices and huge cost overruns, had been counting on the floor price mechanism for some respite against cheap imports flowing into the country.

But as reported in The Financial Express last week, not only have imports of coils and plates doubled over the last four months, prices, as a result, have crashed steeply ranging from Rs 500 to Rs 1,200 per tonne for various categories of steel. Steel companies and traders have attributed this to poor offtake from user industries and have said that prices are likely to drop further in the next month. This will directly affect realisations, and will put further pressure on margins in the first quarter. The latest figures show that imports of sheets and coils have increased from 30,000 tonne in December 1998 to 51,000 tonne in March 1999, topping 60,000 tonnes last month. During the same period, import of plates has increased from 11,000tonne to around 20,000 tonne in April.

International prices, which have risen by around $15-25 per tonne over the last two months, are still at a significant 30 to 40 per cent discount to domestic prices.

At the same time, the glut in the domestic market has not allowed the steel companies to raise prices to the floor price levels, as was being feared by downstream steel producers.

Some leading traders contacted by The Financial Express said the surge in imports is due to various development projects wherein duty-free import of steel is allowed so as to keep project cost low.In addition, some steel for refinery projects and ports coming up in Gujarat and Goa has received deemed-export status.

Even the requirement of steel for these projects is met through imported steel because international prices are lower, after taking into account the concessions available through waiver of indirect taxes. The decline in prices of flat products is even more alarming as it is during April that steel pricesare at peak levels.