Industry Updates 22th June 2012





Indian importer riding high on Boron added steel to avoid custom duty
Indian Express reported that leading domestic steel makers have alleged that overseas steel producers, mainly from China, have effectively side stepped paying the enhanced import duty of 7.5% by taking advantage of an anomaly in the Customs Act and selling their produce in India as ‘alloy steel’.

In a meeting with steel secretary Mr DRS Chaudhary on May 30, the Indian steel firms have said that in view of the increase in the import duty on non alloy steel from 5% to 7.5% in the Finance Bill 2012-13, the Chinese steel exporters have started bypassing the import duty classification by taking advantage of an anomaly in the duty structure.

Under Chapter 72 of the Customs Act, addition of a minimum of 0.0008% boron to steel changes the classification of this metal from ‘non alloy’ to ‘alloy steel’, which is what the Chinese companies are resorting to. They are effectively adding the minimal quantity of boron in their produce and shipping them to India as ‘alloy steel’ and are thereby avoiding paying the increased import duty.

(Steel Guru)
NTPC scraps INR 350 crore coal import tender

NTPC has scrapped a tender of about INR 350 crore to import 5 million tonnes coal for which at least three companies including MMTC and Adani Enterprises were in fray.

It has scrapped the tender after receiving higher than expected bids and is likely to issue small tenders when required, sources said. NTPC had invited bids on June 15th 2012 for supply of 0.9 million tonnes imported coal for its Simhadri and Ramagundam projects in Andhra Pradesh.

A senior company official said that the company may issue such separate tenders in next few months. In April, it had floated a tender for importing 5 million tonnes coal for its 14 stations including Talcher Thermal, Talcher Kaniha Power Plants, Farakka, Kahalgaon, Dadri, Rihand, Singrauli, Tanda, Unchahar and Vidhyachal Power Plant.

NTPC, the country's largest power producer, plans to increase coal imports to 16 million tonnes this fiscal due to local shortage. The company imported over 12 million tonnes last financial year. NTPC meets about 15% of its needs through imported coal and most of its 38,000 MW power capacity is coal based. Shortage in domestic fuel supply and distribution companies' inability to purchase power has been affecting NTPC's productivity.

The company has 15 coal based, 7 gas based and 6 JV power stations and plans to be a 128,000 MW entity by 2032. It expects this year's coal requirements to go up by about 15.5% to 164 million tonnes as it targets an addition of 4000 MW of fresh capacity, compared with an addition of 2800 MW last year.
(Steel Guru)
Coal India Ltd, the primary coal producer in the country, under flak for failing to meet its commitments on coal supplies, may have to pull up their socks and come up with some serious explanations as senior officials of the ministry and the company, meet PMO officials later today.

The meeting will deliberate on a 9 point agenda including a moratorium on the penalty, pooling of prices of imported and domestic coal, compensation clause for failure in supplies of coal, production schedule among others. CIL has said that it can supply only n66 per cent of the coal as against a requirement of 80 per cent. CIL chairman, coal secretary and advisor to the coal ministry will be attending the meeting this afternoon.

CIL has failed to meet its commitments of signing bankable fuel supply agreements with power companies despite a presidential directive. Lately, CIL signed about 27 FSAs but power companies have found them to be unviable as banks refuse to fund such projects.

Companies like NTPC and DVC, two government-owned power companies have refused to sign the fuel supply agreement on the current terms.

Sources indicated that CIL will make a fresh presentation on the FSA to the PMO today making a p-itch for doing away with the force majeure clause and a moratorium of three years before the trigger level for compensation kicks off. The PMO, is unlikely to take CIL's explanations or tactics to delay lightly given that several power projects are lying idle for want of coal. CIL has maintained that it is in no position to give the commitments now. This would mean power companies depending on imported coal that would jack up power tariffs.

The PMO has been directly monitoring the coal supply scenario as it has been stuck since the last six months. Despite a direct intervention by PM's principle secretary Pulok Chattterjee, CIL has failed to meet the commitments. This has been a major embarrassment for the government as CIL is a government-owned company and its defiance to fall in line has raised several questions over the role of its management.
(Economic Times)

Indian coal mining scam - CIL may get de allocated blocks

Indian Prime Minister's Office is keen on increasing coal production and is in favour of allocating the de allocated coal blocks to Coal India Limited under the government dispensation.

The coal ministry's announcement under New Auction Notification is likely soon. CIL will have to pay a reserve price for the de allocated blocks.

The crucial meeting between the PMO, coal ministry and CIL is likely on June 22.

On May 5, the coal ministry had decided to de allocate 14 coal blocks and one lignite captive coal block for slow implementation and non-implementation of mining projects by the block allocattees. Two of these coal blocks were allocated to private companies and 12 to government companies of which one of them was CIL.
(Steel Guru)
Ban on iron ore mining leads to lower cargo traffic

Ban on iron ore mining in key states has led to a lower cargo traffic handled by the major ports in May 2012. On YoY basis, total traffic at all major ports combined fell by 5.1% to 94 million tonnes in May 2012.

Iron ore constituted nearly 15% of the total cargo volumes handled at major ports in May last year. However, with the imposition of iron ore mining ban in Goa and Karnataka, iron exports fell 28% this May 2012. In addition, fertilizer, which forms nearly 2% of the total volumes, declined by 25% YoY in May 2012.

The container volumes grew by a modest rate of 5% to 5.1 million tons in May 2012. The global slowdown affected the exports this year. In addition, capacity constraints at few of the major ports led to shift in container volumes to private ports. Ports like JNPT and Chennai are operating at near capacity since the past few quarters. As a result, incremental volumes were handled by private ports like Mundra and Pipavav. These two ports also have a locational advantage over JNPT. Mundra and Pipavav ports are closer to the industrial regions in Rajasthan and Haryana

Going forward, cargo and container volumes are likely to remain under pressure, as the current macro-economic situation is unlikely to improve in the short term. Besides, expansion at major ports is yet to take off due to delay in clearances from the government.
(Steel Guru)
Competition commission of India imposes Rs. 6307 Crore penalty on 11 cement companies
The competition regulator has imposed an unprecedented penalty of Rs 6,307 crore on 11 cement makers, including the Indian arms of global leaders Holcim and Lafarge, holding them guilty of manipulating supplies and prices to post huge profits at the cost of consumers and the economy.

The Competition Commission of India (CCI) has asked the cement companies to pay up the fine in 90 days, and told the Cement Manufacturers Association to stop collecting pricing data and circulating output and dispatch details to its members.

The order, first reported by ET NOW, is expected to hurt the profitability of cement makers, particularly smaller companies that may become takeover targets for bigger players, analysts said. Even if companies litigate, the order has hurt their ability to raise prices in the near future, they said.
The affected firms are Jaiprakash Associates, UltraTech, Ambuja, ACC, Lafarge India, Century Textiles, Madras Cements, Grasim Cements (now merged with UltraTech), India Cements, Binani Cement, JK Cement, and the Cement Manufacturers Association.

Companies to Challenge CCI Order

"The commission has also observed that the act of these cement companies in limiting and controlling supplies in the market and determining prices through an anticompetitive agreement is not only detrimental to the cause of the consumers, but also to the whole economy since cement is a crucial input in construction and infrastructure industry vital for economic development of the country," the order said.

Cement makers categorically denied this and said they would challenge the order.
(Economic Times)
Malaysia looking at barter deal with India on wheat, rice 
The Malaysian Minister of Plantation Industries and Commodities, Mr Bernard Dompok, has hinted that his country was looking at options of importing wheat and rice from India in lieu of palm oil under a barter deal, which he said has immense potential. 
Availing 55 per cent of its vegetable oil requirements through imports, India procured 1.82 million tonnes of palm oil products valued at $ 1.96 billion in 2011 from Malaysia, the country’s second largest supplier of palm oil. The imports are mostly in the form of refined, bleached and deodorised (RBD) palmolein. 
Malaysia derives 30 per cent of its annual rice consumption of 2.5 million tonnes through imports from other countries. Besides, it also imports wheat in order to meet the demand of 1.5 million tonnes (mt), given the absence of domestic output.
(Exim India)


RBI gives nod for advance payments in ` 
MR D. K. Mittal, Banking Secretary in the Finance Ministry, apprised recently that the Reserve Bank of India (RBI) had given the nod for advance payments in rupees for exports to Iran. 
It may be recalled that exporters have for long been calling for an advance payment mechanism to facilitate exports to Iran. They seek to use the conduit in an effort to ease payment problems brought about by sanctions imposed by the West over Tehran's disputed nuclear programme.
(Exim India)
Throughput at Major Ports down 5.7 pc in April-May 
THE ripple effect of the ongoing economic slowdown was clearly evident in the ports sector as the total cargo throughput of the 12 Major Ports slipped 5.7 per cent in the first two months of the current fiscal, compared to a growth of 5.1 per cent in the same period of 2011-12. 
Given the reduced growth in the gross domestic product (GDP), the drop in throughput has come as no surprise to the sector, which also saw the yearly cargo handled slipping into the red for the first time in over a decade. 
The Major Ports also took a hit due to the slump in iron ore cargo, caused by the mining crisis, registering a 29 per cent decline in April-May 2012 compared to a 15 per cent drop in 2011. The highest fall in throughput during the same period was seen in raw fertiliser and finished fertiliser, with a decline of 34.6 per cent and 29.2 per cent, respectively. 
Major Ports, however, attributed the fall in throughput to the rupee depreciation, which reduced the demand for imports. 
The Shipping Ministry has set a growth target of six per cent for 2012-13 over the previous year. A senior Ministry official described the port sector's growth as a reflection of the present global economic activity
(Exim India)

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