1. Common approach needed for manufacturing, steel

Common approach needed for manufacturing, steel

The crux of the matter is either to match the cheap landed prices of imports or make imports prohibitive by enhancing customs duties, imposing AD and countervailing duties and wait for further exchange depreciation

By: | Published: June 30, 2015 12:07 AM

Steel demand characteristically gets its booster by a strong linkage between construction and manufacturing sectors. Construction is investment-driven (public and private) and needs a whole lot of manufactured items for a smooth completion of the project. If the required steel items (eg. boiler grade plates for construction of power vessels) are not indigenously available or are priced higher, imports take place. Similarly for special grade auto body CR sheets, imports are easy way out. Cheaper landed costs also account for large import flows of long products by large buyers and construction agencies.

The crux of the matter is either to match the cheap landed prices of imports or make imports prohibitive by enhancing customs duties, imposing AD and countervailing duties and wait for further exchange depreciation. There is one effective NTB measure in terms of mandatory certification of a few steel products which the ministry of steel has announced and is planning to extend it to other steel categories as well. But strict compliance of these quality orders, particularly with respect to imported items is still not ensured.

In order to address all these issues the US Congress has recently voted in favour of a Trade Preferences Extension Act of 2015 ( HR 1295) that in addition to extend the African growth and opportunities specially for Haiti has also made improvements in AD/CVD laws to combat unfair trade practices and renew Trade Adjustment Assistance. Primarily the approved clauses attempt to effectively enforce the AD/CVD laws by amending/simplifying some of the irritants that were coming into play in implementing the existing laws.

For instance, if no firm data is available on prices and costs in a non-market economy (China for instance), the broadly available export or price subsidy data can be accepted for determination of cost or price. Similarly, the definition of material injury to the domestic producer in anti-dumping or countervailing duty cases has been broadened with less focus on profitability factor. The discretion to apply the highest rate of countervailing subsidy or dumping margin rests with the administrative authority while evaluating adverse influences.

It is, therefore, quite clear that the Act awaiting the President’s consent has been hailed by US steel producers who had profusely thanked all the US senators supporting and bringing relevant amendments to the Act. The US steel industry has also noted with caution that since 2000 a total number of 5.6 million jobs have been lost by US manufacturing sector due to lack of aggressive policies to promote manufacturing in the country.

There are two immediate lessons for Indian steel industry. First, it needs to interact more closely and intensely with the manufacturing sector, particularly those sub-sectors that need steel in various stages of operation and work out a long term strategy to meet their total requirements. The industry would be able to identify profiles and processes that manufacturing would need them to develop in the coming months and years to stay connected with the industry. In this respect, the current thrust on Make in India programme would be the ideal platform to take forward this interactive process.

Secondly, the voice of the industry must be heard at the highest level of policy planning. The industry needs to strategise this process so that genuine grievances (for instance, the threat of imports, current and potential, from China, CIS and CEPA) are put up in a coherent and logical manner at all levels of decision making in the country for a favourable consideration.

It is important to keep in mind that threat of imports to dislodge all plans of product development, capacity augmentation and massive investment is a critical aspect that afflicts both heavy and medium industry-based manufacturing and steel sectors in equal measure. A common approach would be welcome.

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

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