A common prescription of industrialisation has been the infant industry argument. It has been widely accepted that state support is a must for the growing stage of any industry till it is adolescent.
A common prescription of industrialisation has been the infant industry argument. It has been widely accepted that state support is a must for the growing stage of any industry till it is adolescent. The support in terms of priority land acquisition, faster project clearance, exemption from taxes and levies and other benefits during the formative period has also been permitted by WTO by keeping them outside the purview of actionable subsidies while undertaking Countervailing Duty Investigations.
However, the government support to industries need not stop as soon as the industry becomes a commercial entity and enters a competitive world. The support is required if the industry faces an uneven competition from players, domestic or global. The beginning of the twenty first century has shown that hands off policy by the government, an essential parameter of free competition in a capitalist structure, does not actually hold good and instances are galore with advanced capitalist countries seeking government support for the industry which are facing challenges that may or may not, impinge on the prescribed rules of the game. It is observed that one of the critical areas where frequently the government support is sought for relates to international trade which is currently undergoing stiff challenges in view of trade sanctions declared by the US, forcing other affected countries like China and EU to adopt retaliatory measures.
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Despite the superlative efforts by WTO, drafting meticulous clauses, rules and agreements to act as guiding principles for conducting world trade, strong deviations have taken place. Countries with excess steel capacity have exported the product at a dumping price to distort the market mechanisms of the importing countries. The various trade measures under WTO namely, ADD, CVD, SGD penalise the exporting countries for violating the rules of trade and causing injury to the importing countries. These measures, though effective, but could not fully take care of the concerns of the importing countries and as most of them are developing nations, the fighting of AD or CVD cases become expensive and time taken. On the other hand, while there is a genuine need of high value steel items demanded by the critical sectors of these economies, which must come from import sources, the expanding market size of these countries also offer abundant space for low priced surplus steel in standard grades from these advanced countries including China.
The steel import scenario of India in the current context has a direct impact on the health of the industry. Apart from value-added items, India is also flooded with cheap imports of standard basic grade which are otherwise abundantly available. These products take away the market share from the domestic players only on price considerations and in most of the cases these are imported as seconds and defectives. Had there been any prior intimation of the arrival of these imports to India, the domestic players could have adopted appropriate strategies.
Thus, the latest notification by DGTR (17-2015-20) under MOC on amendment of import policy from ‘free’ to: ‘free subject to compulsory registration under Steel Import Monitoring System (SIMS)’ is a testimony of a genuine government support to stand by Indian steel industry which has been hugely suffering from the sudden arrival of unwanted imports. This notification is applicable for 180 numbers of steel items under chapter 72, 91 numbers under chapter 73 and 13 numbers under chapter 86 of ITC (HS) 2017 schedule-1 import policy with insertion of a new policy condition to these chapters.
The SIMS, which nearly replicates similar scheme (SIMA) applicable by USTR, requires the importer to submit advance information online for import of the identified items and obtain a registration number not earlier than 60th day and not later than 15th day before the expected arrival of the import consignment. The customs clearance of the consignment is subject to the entry of the registration number and expiry date of the automatic registration (validity 75 days).
The total 284 numbers cover all steel items (including alloy and stainless steel), steel fabricated products, tubes and pipes, railway materials, articles of iron and steel. The notification covers the entire gamut of steel profiles which includes pipes, railway materials as well as a good number of capital goods containing steel. The imports of capital goods containing steel have been engaging attention of both steel and capital goods industries. It is a challenge to capital goods sector to build up indigenous capacities to produce these items and the steel industry felt that it was losing order for steel products that are needed to produce these items.
An advance intimation of import arrivals would bring out these signals quite openly. The notification should not be termed as a trade barrier as some of the media reports had already suggested. To know in advance the likely imports of steel and goods containing steel would help the government to know the likely outgo of foreign exchange, the capital goods industry to assess the capabilities and urgency to create capacities to produce these items and steel industry to adjust their production and marketing strategies to combat the impact of the arrival. This timely step by the government based on inputs from the industry highlights the effectiveness of government support to the industry on an aspect that it was long waiting for.
(The author is DG, Institute for steel development and growth. Views are personal)