1. Can industry ask govt to exclude steel from foreign pacts?

Can industry ask govt to exclude steel from foreign pacts?

India still holds the potential of one of the biggest consumers of steel on the back of revival of manufacturing and capital goods sectors and construction supported by higher public and private investments. Thus steel as a sector continues to remain an attractive space for accommodating higher imports with abundant duty concessions

By: | Published: June 23, 2015 12:19 AM

There is a mixed feeling to the hike in import tariff by 2.5% on long and flat steel products. It is a right step but falls short of the expectation of the industry. The government has done a balancing act by keeping in view the interests of consumers using imported steel. It may not arrest the flows of cheap imports from China and CIS that has gone up by 25% in first two months of FY16. It would neither affect the flow of steel imports from Korea and Japan under RCEP that has gone up by 77% in the same period.

The industry is planning to file anti-dumping petition against cheap imports after establishing injury to the domestic players due to selling below the fair price. The whole process would take its own time. Subject to availability of data to identify subsidised exports from China and CIS causing injury to our domestic players, the countervailing duty measures may also be imposed.

That leaves a major component of imports covered under RCEP. From the current trend of trade negotiations it is clear that India would be looking for higher market access in a host of other countries like Thailand, Indonesia, Malaysia, the Philippines, Vietnam, Australia, New Zealand and other countries in Asean trade bloc and China. This is in conformity with the declining export volume by India (total exports) in the recent period. India’s need for FDI in infrastructure and other social areas is enormous and treaties under RCEP/FTAs provide opportunities to have a share of FDI flows.

In order to get these accesses and foreign investments, India needs to open its market in some of the categories to facilitate import flows and steel happens to be one of them. More than adequate capacities have been created in steel in China, Japan, the US, South Korea, Germany, France, the UK, Italy, Russia, Ukraine, Turkey, Indonesia and a host of other countries. Global demand for steel is subdued.

In the midst of such a bleak scenario, India still holds the potential of one of the biggest consumers of steel on the back of revival of manufacturing, capital goods sectors and construction supported by higher public and private investments. Thus steel as a sector continues to remain an attractive space for accommodating higher imports with abundant duty concessions. Considering the adverse implications of the existing RCEP with Japan and Korea, can the industry request the government to exclude steel from all such future negotiations?

There is a general perception that compared to some other countries, Indian steel is not cost competitive. The fact that capital costs, logistic costs, various taxes, levies, entry taxes paid by Indian steel producers are on an average 20-25% higher than those applicable for its counterparts in other countries is glossed over while making price comparison between imported steel and steel manufactured in India. There are some large steel buyers who are not concerned with the costs incurred by local producers but only take the final price into account to choose their preference.

The US prefers and legitimates steel made indigenously for all federal-funded projects. We could not do that. Any aid or joint ventures by Japan and South Korea to fulfil their investment commitments in India as dictated under RCEP in terms of setting up of downstream units (CRM/coated products) envisage import of mother products (HR coils in this case) from their mills which are otherwise surplus. This trend only supplements the rising threat of imports from these two countries and is an issue of great concern to the industry.

It is also suggested that India instead of seeking total exclusion of steel from future negotiations can request for selected steel items (selected HS code) to be taken out of agreement. There are issues like differentiating between steel plates and sheets, addition of alloying elements like Boron, Niobium, thereby making them eligible under separate HS code, steel exports from China and a few other countries enjoying subsidised loans from banks, concessions on freight and other duties and above all complicated Rules of Origin. All these would make it extremely difficult for our customs authorities to enforce rules as per the terms of agreement for excluded categories of steel and provide relief to the indigenous steel industry. What are the other avenues open to the industry?

The author is DG, Institute of Steel Growth and Development. Views expressed are personal.

For Updates Check Commodity News; follow us on Facebook and Twitter

  1. No Comments.

Go to Top