Indian Steel Millers Urge Government to Shun PSI and Import Duty

The country's steel and re-rolling millers yesterday urged the government to abolish the pre-shipment inspection (PSI) system, solve import duty discrimination and allow exports of surplus production to help the industry contribute more to the national economy.

The pleas came at a meeting between Commerce Minister Muhammad Faruk Khan and leaders of Bangladesh Auto Re-Rolling and Steel Mills Association at the secretariat in the capital.

The millers urged the government to abolish the pre-shipment inspection (PSI) system in the imports of raw materials such as melting scrap and re-rollable scrap, as they pay duty during imports.

They said value added taxes (VAT) on raw materials, chemical and machinery should be withdrawn to stop shutting down of country's steel and re-rolling mills.

"About 100 mills have already been closed down, as we are forced to pay VAT for chemical used by the domestic steel mills to produce billet and other machinery," said Abul Kashem Majumder, secretary general of the association.

"We are even paying VAT on power and gas consumption," he said.

The country's existing steel and re-rolling mills can produce 80 lakh tonnes of steel products annually, but they are running at 40 percent of the capacity due to power and gas crisis.

The 32-lakh-tonnes steel production is however enough to meet the annual domestic consumption of 12 lakh tonnes, said Sheikh Masadul Alam Masud, president of the association.

"There is a huge market for rods in the seven states in northern India. If exports are simplified our steel mills will be able to earn a lot of foreign currency after meeting domestic demand," he said.

He said the country's foray into the neighbouring country is being hamstrung by high export duty and India's denial to accept Bangladesh's testing report on MS rods.

"The government should discuss the issue with its Indian counterpart to export MS products to the seven Indian states. If we can make a breakthrough, India will get steel products cheaply, while Bangladesh will be able to earn about Tk 20,000 crore annually."

"It will also help bridge the huge trade imbalance existing between the two countries," Masud said.

The association urged the minister to withdraw charges levied by shipping lines, cut demurrage charges by half and take steps for ensuring faster delivery of containers from ports.

Local steel and re-rolling mills are financed by the banks. As a result they are affected by interest rate swings, as a rise in borrowing rate pushes up the prices of MS products.

Lending rates now range between 18 to 20 percent, after the central bank withdrew the 13 percent cap on interest rates.

"Due to high prices, consumers use less MS products than required. So, we are being forced to produce less while paying high interests," said Masud.