A few weeks ago, we raised the issue of defensive strategies pursued by steel producers around the world in the background of demand recession and falling prices. Indian steel producers have asked for a review of Cepa (Comprehensive Economic Partnership Agreements) with South Korea and Japan through which massive imports of CR Coils flooded the country, particularly in Q3 and Q4 of 2011. Although the government has raised duty on flat products (including boron mixed) from 5% to 7.5%, duties applicable on imports from Korea and Japan range between 3.125% and 3% in 2012-13 before reducing to zero by 2016-17. More than 7 million tonnes of capacity has been created in CR in the country to cater to the domestic demand and exports. Annual imports of CR in the range of 0.8-1 million tonnes are mostly by the auto sector some of which can be met by the indigenous producers, but for the supplies made under compulsion through various tie-up arrangements and Cepa.

The urge to review Cepa provisions is, therefore, a legitimate demand from the industry. Looking around, the issues of similar nature are being dealt by the governments with decisions favouring the interests of domestic industry. But this leaves a much higher responsibility on the industrial bodies like CII, Ficci, and Assocham to assess the impact of various provisions under the agreement on specific sector and to provide suitable inputs to the government before the signing of the agreement. The objective of FTAs is to promote two-way trade and not to create avoidable tensions between the two partners and undermine the spirit of free and fair trade. FTAs are well recognised under WTO rules of trade. However, it needs a more vigilant Surveillance and a speedy Dispute Settlement mechanism to avoid injuries to the domestic industry arising out of the provisions of the agreement. The ministry of commerce has also to supervise that the spirit of trade is maintained without any detriment to the indigenous industry in the post-agreement period.

Recent order of withdrawing the duty-free benefit to power plant equipment is another case in point. Indigenous capital goods industry, including steel, has taken it up with the government for the last few years to introduce level playing field in power plant equipment. High cost of indigenous equipment and long delivery period are some of the factors that prompted the government to take this measure to expedite the installation of power capacity in the country. It would now be left to the agencies executing the power projects in the coming years (beyond 12th plan) to either import or procure indigenously. It is expected that the government takes the same view on duty free import of shipbuilding quality plates in order to revitalise the domestic manufacturers.

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