Commerce Ministry Recommends 12% Import Duty on Steel Products to Protect Domestic Industry

The Directorate General of Trade Remedies (DGTR) has advised a 12% provisional safeguard duty on specific steel products for 200 days. This move aims to shield local manufacturers from a surge in imports. The investigation began last December, focusing on the sudden rise in imports of Non-Alloy and Alloy Steel Flat Products, which are crucial in various sectors like construction and automotive.

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The DGTR's probe was initiated following a complaint by the Indian Steel Association. This association represents major players such as ArcelorMittal Nippon Steel India, JSW Steel, and the Steel Authority of India Limited. The investigation revealed a significant and sudden increase in imports, posing a threat to domestic producers.

Impact on Domestic Industry

The DGTR's notification dated March 18 highlighted urgent circumstances necessitating immediate safeguard measures. It recommended a 12% ad valorem duty for 200 days on these imports while awaiting a final decision. The finance ministry will make the ultimate call on imposing this duty.

Imports of these steel products have surged from 2.293 million tonnes in 2021-22 to 6.612 million tonnes during the investigation period from October 2023 to September 2024. This increase is primarily from countries like China, Japan, Korea, and Vietnam.

Industry Reactions

While large domestic steel producers support the duty imposition, user industries oppose it due to potential raw material price hikes affecting their competitiveness. MSME exporters argue that additional duties would make domestic products less competitive globally.

S C Ralhan, Chairman of the Hand Tool Association, expressed concerns about the duty's impact on exports. "It will be very damaging for MSME exporters and manufacturers as the duty will increase prices of steel which is a key raw material for our industry," he stated.

Broader Economic Implications

Safeguard measures like duties or restrictions are trade remedies available to WTO member countries to protect domestic industries from unexpected import surges. Unlike anti-dumping duties, these apply uniformly across all countries.

The Global Trade Research Initiative (GTRI) warned that the proposed duty could raise steel prices, negatively impacting sectors like automotive and infrastructure. Ajay Srivastava, GTRI Founder, noted that specialized steel needs remain unmet domestically due to technological limitations.

Concerns Over Procedural Violations

Srivastava also pointed out procedural issues with the safeguard order. The investigation began just six days after receiving the petition, potentially violating Rule 53 of India's Safeguard Rules, which mandates a thorough review before starting an inquiry.

The proposed duty could contradict India's Make in India initiative by increasing costs for local manufacturers reliant on imported materials. It might also encourage monopolistic practices by limiting consumer choices and inflating prices.

This safeguard measure has sparked significant debate within the industry due to its potential economic impact and procedural concerns. The final decision by the finance ministry will be crucial in determining its implementation and effects on various sectors.