Govt Remains Committed to Curb Cheap Steel Imports, Anti-dumping Duty May Replace MIP

The recent government action to extend the minimum import price (MIP) on 66 steel products by two months till 4 December 2016 shows the government's desire to extend protection for a longer time, says India Ratings and Research (Ind-Ra). Many of the 66 products are mostly subject to an anti-dumping investigation, which is likely to be completed over the next two months. Ind-Ra believes that once this is completed anti-dumping duty (ADD) is likely to be imposed on most of these products for an extended period.

Ind-Ra had highlighted the need for safeguards in June 2016 in the report 'Steel Production May Not Rise in FY17, In the Absence of MIP'. Ind-Ra notes that in August 2016, GoI reduced the items under MIP to 66 from 173 and imposed an ADD on most of the excluded items, namely on hot rolled flat products and cold rolled flat products. The ADD is slightly less restrictive since they apply only to a specified country of origin; in this case the six named countries included, People's Republic of China, Japan, Korea RP, Russia, Brazil and Indonesia which account for around 90%-95% of hot rolled products imported into India. While a notification for cold rolled flat products originating or exported from People's Republic of China, Japan, Korea RP and Ukraine accounted for around 90% of imports.

During April-August 2016, India's steel imports declined by 34.5% yoy to 3.01m tonne. Ind-Ra expects GoI to continue to protect domestic steel players from cheap imports. Over FY15-FY16, GoI took various quantitative and qualitative steps to curb the increase in imports into India, however it is only post the imposition of MIP on 5 February 2016, the domestic steel industry heaved a sigh of relief.

The scope of ADD is restricted to the originating countries named and is therefore narrower in scope than MIP, its impact however when applicable is the same as MIP. The ADD imposed on steel products are not fixed and will be calculated at a rate which is equivalent to the difference between the amount identified in the notification and the landed value of the goods covered under ADD, provided the landed value is less than the amount specified. This will protect the domestic steel industry from cheap imports, in the event the landed price of steel further declines and will have a similar impact as MIP. The key difference between MIP and ADD is that MIP is applicable on the import of goods from any country, whereas ADD is specific to goods imported from certain countries/producers as is notified.

Under General Agreement on Tariffs and Trade (GATT) ADD is a more acceptable protection measure provided against dumping of products. GATT provides member countries with the liberty to protect the domestic industry from external injuries; however it is against the restriction of fair trade. Thereby any member country can use ADD for the protection of their domestic industry, in the event that an investigation proves that dumping by other countries is injuring the domestic industry.

The absence of safeguard measures either in the form of MIP or ADD on value added flat rolled products of alloy or non-alloy steel, clad, plated or coated will lead to a surge in imports. As raw material for these value added products, mainly flat products, are already under ADD and therefore domestic producers will be compromised if the end product is allowed to be imported freely at cheaper prices internationally. Ind-Ra expects the protection for the steel industry in the form of ADD or MIP to continue even beyond December 2016.

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