The 25 per cent safeguard duty on imports of steel will likely impact and affect many SME and MSME steel users across India and will lead to serious disruption in steel sector.

 

Major steel users and associations have decided to voice-out their concerns over the Indian Steel Alliance (ISA) petition on imposing 25 per cent safeguard duty on imports of steel items by writing a letter to various ministries and PMO.Vaibhav Purohit, Citizen Civic Solutions Foundation Organisation, informed, “Associations like us, along with the associations namely, Chamber of Association of Maharashtra Industry and Trade, Chamber of Small Industry Association, Fasteners Association of India, Steel Chamber of India, Steel Users Federation of India, Thane Small Scale Industries Association and Hooghly Chamber of Commerce and Industry are making efforts to meet as many concerned authorities as possible.”

 

As per WTO rules, safeguard measures are defined as emergency actions in response to large scale increase in imports or a surge in imports. However, the imports have considerably decreased in the last three years as a result of a series of various protective measures. Since September 2015, both tariff and non-tariff measures were announced for various steel items. Meanwhile, the total imports of steels account to just six per cent of the total gross production in India. The total imports were just 4.68 per cent of total production in the country as on May 2019.

 

The CCSF claims that with 12.5 per cent of basic customs duty on most flat products, like HRC, plus a surcharge of 10 progressive consumption tax,  imports from most countries like China, Europe and The Commonwealth of Independent States has become unviable and substantially declined. A significant portion of the imports comprises of grades, sizes and quality that is not available sufficiently or timely in India or of finished goods for export purpose.

 

India has a Free Trade Agreements (FTA) with Japan and South Korea, but the quantity of material imported from these countries accounts to a very small percentage of the total consumption in India. These countries have several investments in India, like the Posco Maharashtra set up by the steel giant Posco of South Korea.Since 2015, there have been numerous announcements made by the Indian Government to protect the primary steel industries. These include minimum import price, safeguard duty, anti-dumping duty, steel quality control order, etc. As a result of such protection, the steel prices prevailing within the country have been substantially higher with regard to international prices. Steel users in India pay substantially higher prices to domestic mills compared to the prevailing international prices. The safeguard duty lapsed just a few months ago, but the anti-dumping duty is already in place on most items of steel.Purohit further states, “We strongly disagree with the argument that imports will affect the economy badly. Instead, imposition of safeguard duty on steel imports will make steel costlier and only a few steel mills will be in a dominating position, creating a monopolistic market in India, which will give rise to agitation amongst the steel users, traders, SMEs and MSMEs.”

 

The steel bodies and associations have sent letters to the PMO and finance, commerce, steel and MSME ministries, explaining the issue and urging the officials, not implement safeguard duty on imports of steel. In the letter they have put forward the views of the secondary steel producers, steel users, SMEs, and importers. Importers have argued that this is against the principles of natural justice as consignments booked prior to this and for which having opened an irrevocable Letter of credit has left them helpless.Some factors behind the low domestic demand of steel as, liquidity crisis, NBFC crisis, real estate is still in trouble, slow-moving infrastructure projects, and off the mark manufacturing sector policies.