Import of Metallic Scrap has become a major issue engaging the attention of government, importers and trading communities ever since the burst of live shells led to death of a few innocent people inside the factory premises of a manufacturer-importer. It is in everyone's knowledge that Melting Scrap consignments had in the past contained shells and other ammunitions and stray explosions have taken place. But the enormity of the latest event has surpassed the past record. The govt. has since come out with a series of measures intended to put a stop to this life-threatening menace. Basically these are:-

• Metallic Waste and Scrap other than hazardous, toxic waste, radioactive contaminated waste/scrap in shredded form, if accompanied by a pre-shipment certificate, would be physically examined to the extent of 10 per cent of the consignment subject to minimum one container, which would be examined 100 per cent. Failure to provide a pre-shipment certificate would result in 100 per cent examination of all consignments of shredded scrap.

• Metallic Scrap in unshredded, compressed and loose form would be imported through Chennai, Cochin, Ennore, JNPT, Kandla, Mormugao, Mumbai, New Mangalore, Paradip, Tuticorin, Vishakhapatnam, ICD Tughlakabad, Pipava, Mundra and Kolkata ports only. These imports must be accompanied by pre-shipment inspection certificate issued by one of the 23 agencies including DNV, Bureau Veritas, BSI Inspectorate and SGS.

• All imports of Metallic Scrap arrived or shipped from their place of origin prior to 25th October 2004 would be subject to 100 per cent inspection.

• For import consignments arrived after 25th October 2004, examination to the extent of 25 per cent is mandatory for Manufacturer-Importer. Such consignments by traders would be examined to the extent of 50 per cent, subject to full examination of one container.

• Manufacturers-Importers of Metallic Scrap that have landed on or before 25th October 2004 may be permitted to remove the containers to their premises for examination only. However full customs duty has to be deposited before removing the consignment from ports/ICD.

One would recall that around four years back large-scale imports of cheaper varieties of seconds and defective steel had not only encouraged the domestic end users to go in for these imports but also depressed the domestic prices of all categories. In order to discourage this trend, the government had restricted these imports to be routed only through four major ports and made the pre-shipment certificates to be mandatory with each consignment of seconds and defectives. These measures did restrict the imports as subsequent import data have confirmed, but most of this was due to firming up of international prices and much less due to the fallout of these steps. The stringent conditions now imposed seem to have landed the customs and port authorities into various problems. First, the inspection agencies are very reluctant to give such a certificate for scrap consignments in view of large number of concealed methods adopted by the importers particularly with respect to the hazardous nature of the same and the severe penalty associated with it. Secondly, it is becoming increasingly difficult to conduct 100 per cent inspection by the concerned customs authorities, the easy availability of electronic scanners in all designated ports at such a large scale being one of the major problems. It is understood that of all the ports in India only Nava Sheva port has an electronic scanner. Container Freight Stations are also refusing to conduct inspection. Thirdly, other metal scraps like nickel, tin and copper should have been treated separately from steel scrap. Fourthly, the delay and costs associated with 100 per cent inspection of all imports of unshredded scrap have compelled many of the importers not to take delivery of the consignments. All these have resulted in congestion of more than 5000 containers of metal scrap at Mumbai, Nava Sheva and Mundra.

Global price of Melting Scrap are hovering around $260-$280 C&F. There are also reports of non-availability of imported Melting Scrap for Indian ports as imports to other countries are without any hassles. Thus although the landed cost of imported scrap at major consumption points (excise paid) comes to around Rs.15000-16000/- per tonne, it is selling at Rs.18000/-per tonne. The perceived threat of further import restrictions is proving a bonanza for the scrap dealers.

It is quite possible that problems of scrap import are resulting in excessive use of Sponge Iron in the charge-mix of furnaces. The current average price of Sponge Iron at major centers is Rs.14000/- per tonne. At 50:50 ratio the cost of production is arrived at Rs.16000/- per tonne. The average conversion cost for ingots may be taken as Rs.4000-4500/-per tonne and therefore the price of pencil ingots comes to Rs.20500/- per tonne as against the prevailing price of Rs.21400-22100/-per tonne, leaving a net margin of an average Rs.1200/ per tonne only for the ingot manufacturers. This does not seem to be adequate.

This disproportionate cost structure, therefore, has brought about a forced change in the charge-mix to 70:30 in favour of sponge iron. At a cost of Rs.15000-15200/- per tonne the net margin for the ingot manufacturers reach a level of average Rs.21000/- per tonne, which appears reasonable. Even assuming that there is a small quantity of pig iron to be used in making ingot along with scrap and sponge iron, the cost would undergo a little change. On a long term basis the sudden spurt in fresh capacity addition in sponge iron particularly near Eastern and Central region having proximity to the deposits of iron ore could not have come at a better time. In 2003 India has dislodged Venezuela as the largest producer of sponge iron. The current year was exhibiting sign of excess availability of sponge iron at the beginning of the year and now with the crisis engulfing the smooth availability of imported melting scrap, the pries of sponge iron may move northbound in the coming months.

From the above it is apparent that the government is yet to formulate a comprehensive policy to deal effectively with the problems surrounding the import of melting scrap. To announce a spate of policy measures, which are, not implement able and give rise to large options of their misuse can at best be called a panic reaction. It is sincerely hoped that the government is seriously looking into the security aspect of the whole episode. Why so many live shells and cartridges are finding its way to Indian shores? Have the government interacted with other scrap importing countries to discount similar phenomenon? There are as yet no reports of any hazardous materials in the consignments of scrap discovered after inspection in the recent arrival of imports. If there is none, it can be reasonably argued that all along it was a deliberate attempt to send hazardous materials in the guise of scrap to India, which has dangerous implications. As of now it is widely believed that compulsion of port congestion and non-release of containers would lead to a situation which would make it imperative for the government to relax the guidelines of import of scrap.