Containing the current account deficit and arresting the rupee?s fall are two major tasks the government has recently taken up. It has raised the import duty on gold, discouraged non-essential imports, tried to boost exports and taken a shot at removing roadblocks in the implementation of mega projects. However, amid all this, it needs to take into account the interests of domestic producers, who have invested billions of dollars for generating income and employment in the country. The latest notification (no. 33/2013-14) issued by the Directorate General of Foreign Trade (DGFT) is one such instance, wherein the commerce ministry has negated the implication of the Steel Products (Quality Control) Second Order, 2012, issued by the ministry of steel.
Steel manufacturers abroad, whether it?s the US, Japan, Europe, Russia or the UK, make steel conforming to their specifications and all these countries have equivalent international specifications. Regrettably, some of Indian steel standards have no exact international equivalents and differ with respect to testing norms and other factors. We understand that a good deal of interaction has already happened among the ministry of steel, BIS, foreign suppliers of critical products and user industries, which has ultimately led to scrapping of the order for imported steel. This is unfortunate and has many adverse implications for the Indian steel market.
First, it will dilute the second quality control order as WTO?s major argument against any quality standard on steel in India was that it must initially be implemented for inferior grades of steel produced by indigenous manufacturers. Now, with the ministry of steel steadfastly making the order applicable for domestic steel producers, the exemption of imported steel from the order makes it discriminatory and creates a perplexing situation.
Second, if any particular specifications of critical categories of steel are not indigenously available (such as CRGO, higher grades of CRNO, API>100 grades of HRC/plates/pipes, IF/BH/AHSS and CRC of higher strength) and no equivalent Indian specifications can be made available, the customs authorities could be clearly advised to clear consignments bearing those foreign specifications. This is what was expected of the agencies concerned and not the scrapping of the entire notification for a large segment.
Third, steel import data would show that a large volume of seconds/defective steel from these critical grades has been flooding the Indian market, taking advantage of the huge price differential. In fact, one of the prime objectives of the quality order was to restrict imports that distort the market through price and quality manipulations. Now that the prime grades of imports have been kept outside mandatory quality norms, the defective grades would continue to come freely into the country.
The effectiveness of the notification has been further diluted and this is in the knowledge of the ministry of commerce and DGFT that customs authorities have no wherewithal to check whether the imports are for specified purposes, namely for infrastructure and a few other recommended sectors, or if the unused material is disposed off in the domestic market after following the norms of the quality order applicable for domestic manufacturers.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal