 "Commerce ministry prefers stricter enforcement of steel standards over duty barriers")
In a tussle between manufacturers and the end-user industry over imposition of steel import curbs, the department of commerce has recommended introduction of standards on certain grades, as a way to keep shipments from South Korea and China at bay.
This comes as India is preparing itself for a mid-term review of its trade pact with Korea, where steel is an important component. Even as the ministry of steel and the department of financial services back an anti-dumping duty, safeguard measures and a minimum import price, to address a surge in inflow which is affecting home manufacturers and banks’ asset quality, the commerce department is batting for non-tariff measures.
This is to avoid being dragged to a dispute at the World Trade Organization (WTO), it argues. “Tariff barriers don’t work. We have done it and it didn’t take us anywhere. One way is to bring in robust standards of grades of steel that we manufacture and not allow anything that do not comply with those,” said a senior commerce department official. “We will support anti-dumping and safeguards only if there is strong factual evidence, as we can be challenged at WTO.”
The steel ministry had notified mandatory Bureau of Indian Standards certification for 15 grades of steel last month and is in the process of notifying 16 more. The grades included hot-rolled flat products, cold-reduced carbon steel sheets, carbon steel billets and slabs to check imports of sub-standard items. Therefore, companies will have to get the imported steel certified. “The steel ministry and commerce department are on the same page on notification of standards and this will allow us to be clear about what is really needed for the country,” said the official.
While India also has the opportunity to re-look at the India-Korea free trade agreement, it cannot go back on what it committed on steel. "(However) the way out is to bring in robust standards. Half-baked standards are not going to help. We will also calibrate positions on certain products and open access on some other things,” said the official.
By the FTA with Korea, the import duty by India is only 0.85 per cent on a majority of steel products.
The pact took effect from 2010 and one with Japan in 2011. South Korea has been pushing for upgrading the FTA. Under the pact, India agreed to eliminate duties on 75 per cent of products imported from Korea on a custom-value basis during the eight years from 2010. South Korea agreed to remove duties on 93 per cent of products from India during the period.
Japan, Korea and China accounted for about half of iron and steel imports into the country in the first half of this financial year, worth about $3 billion.
Korean steel maker Posco has been particularly hit by the safeguard duty, since it was importing products to India from its domestic manufacturing facility in Korea for processing.
Its case was taken up earlier with the Indian government by the Korean authorities.
The commerce department has attributed the impact on domestic manufacturers to global factors. It has argued 85 per cent of steel demand is being met domestically and that Indian steel companies are operating at nearly 80 per cent capacity. India's peak import of steel this year has been 15 per cent of total domestic consumption, compared to nine per cent in previous years.
“There is no panic situation. The capacity utilisation of steel plants around the world is under 70 per cent; for India, it is 80 per cent. Yes, our steel manufacturers have felt the pinch as they had to bring down prices but they are still manufacturing and selling. This pain is being felt around the world,” said the official.
The government had imposed a provisional 20 per cent safeguard duty on hot rolled steel in September for 200 days and is currently investigating injury to the domestic industry before a final decision. Beside, import duty has been raised by five per cent on all categories of steel. The protectionist measures are being taken for a few primary producers, on the grounds that they are over-leveraged and their bank loans could become non-performing assets.
The commerce department will take a calibrated approach to the proposal to impose a minimum import price on steel or an anti-dumping duty, given the likely impact on exports. “There are certain grades of steel that come into the country, essential for downstream manufacturing such as in engineering and automobiles. If we curb those, it will hurt our own industry and exports,” said another official.
India’s engineering exports, largest contributor in the country's export basket, have fallen by close to 15 per cent in the April-December period of the current financial year.
This comes as India is preparing itself for a mid-term review of its trade pact with Korea, where steel is an important component. Even as the ministry of steel and the department of financial services back an anti-dumping duty, safeguard measures and a minimum import price, to address a surge in inflow which is affecting home manufacturers and banks’ asset quality, the commerce department is batting for non-tariff measures.
This is to avoid being dragged to a dispute at the World Trade Organization (WTO), it argues. “Tariff barriers don’t work. We have done it and it didn’t take us anywhere. One way is to bring in robust standards of grades of steel that we manufacture and not allow anything that do not comply with those,” said a senior commerce department official. “We will support anti-dumping and safeguards only if there is strong factual evidence, as we can be challenged at WTO.”
The steel ministry had notified mandatory Bureau of Indian Standards certification for 15 grades of steel last month and is in the process of notifying 16 more. The grades included hot-rolled flat products, cold-reduced carbon steel sheets, carbon steel billets and slabs to check imports of sub-standard items. Therefore, companies will have to get the imported steel certified. “The steel ministry and commerce department are on the same page on notification of standards and this will allow us to be clear about what is really needed for the country,” said the official.
While India also has the opportunity to re-look at the India-Korea free trade agreement, it cannot go back on what it committed on steel. "(However) the way out is to bring in robust standards. Half-baked standards are not going to help. We will also calibrate positions on certain products and open access on some other things,” said the official.
By the FTA with Korea, the import duty by India is only 0.85 per cent on a majority of steel products.
The pact took effect from 2010 and one with Japan in 2011. South Korea has been pushing for upgrading the FTA. Under the pact, India agreed to eliminate duties on 75 per cent of products imported from Korea on a custom-value basis during the eight years from 2010. South Korea agreed to remove duties on 93 per cent of products from India during the period.
Japan, Korea and China accounted for about half of iron and steel imports into the country in the first half of this financial year, worth about $3 billion.
Korean steel maker Posco has been particularly hit by the safeguard duty, since it was importing products to India from its domestic manufacturing facility in Korea for processing.
Its case was taken up earlier with the Indian government by the Korean authorities.
The commerce department has attributed the impact on domestic manufacturers to global factors. It has argued 85 per cent of steel demand is being met domestically and that Indian steel companies are operating at nearly 80 per cent capacity. India's peak import of steel this year has been 15 per cent of total domestic consumption, compared to nine per cent in previous years.
“There is no panic situation. The capacity utilisation of steel plants around the world is under 70 per cent; for India, it is 80 per cent. Yes, our steel manufacturers have felt the pinch as they had to bring down prices but they are still manufacturing and selling. This pain is being felt around the world,” said the official.
The government had imposed a provisional 20 per cent safeguard duty on hot rolled steel in September for 200 days and is currently investigating injury to the domestic industry before a final decision. Beside, import duty has been raised by five per cent on all categories of steel. The protectionist measures are being taken for a few primary producers, on the grounds that they are over-leveraged and their bank loans could become non-performing assets.
The commerce department will take a calibrated approach to the proposal to impose a minimum import price on steel or an anti-dumping duty, given the likely impact on exports. “There are certain grades of steel that come into the country, essential for downstream manufacturing such as in engineering and automobiles. If we curb those, it will hurt our own industry and exports,” said another official.
India’s engineering exports, largest contributor in the country's export basket, have fallen by close to 15 per cent in the April-December period of the current financial year.