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Steel makers, including government-controlled Steel Authority of India (SAIL), have sought imposition of 'safeguard duty' on imported hot-rolled (HR) steel coil.
SAIL apart, JSW Steel, largest domestic producer, and Essar Steel have filed a petition with the directorate general of safeguards. “We received a complaint from these three companies last week. The investigation for imposing safeguard duty will begin once the procedural requirements are fulfilled,” said a senior government official, on condition of anonymity.
Under pressure from cheaper imports and slack domestic demand, JSW reported a loss of Rs 106.8 crore for the quarter ended June, against a net profit of Rs 656 crore for the corresponding quarter last year. “While cheap imports might benefit user industries in the short term, surely reliance on imported steel cannot be a sustainable business strategy,”
Sajjan Jindal, its chairman and managing director, said while addressing its 21st annual general meeting on July 28.
SAIL reported a 20 per cent decline in profit after tax at Rs 2,093 crore for 2014-15. Two months earlier, the government raised the import duty to 10 per cent from the earlier 7.5 per cent on flat steel products and to 7.5 per cent from five per cent for long products. According to industry sources, this hasn't been enough to stop the surging import from China.
India’s total steel import surged 71 per cent to 9.31 million tonnes in 2014-15 from 5.45 mt the previous year, with Chinese imports having the majority share. China exported 1.5 mt HR coil; imports also came sizably from Japan and Korea. The HR coil market is about 17 mt, of which seven mt is captive consumption of steel companies. About 2.5 mt is imported.
Under the safeguard norms, the process can be initiated if the majority of market entities are being affected by cheaper imports. The three companies constitute 68 per cent of HR coil production. “They, however, have the backing of all players including Tata Steel, Jindal Steel & Power and Bhushan Steel,” said an official.
While imports from China attract a duty of 10 per cent, products from Japan and Korea are shipped at only one per cent duty, as we have free trade agreements with both countries. Industry insiders claim the three countries selling HR coil to Indian buyers at less than their domestic rates.
“Since their production capacity is higher than the local demand, they have increased imports at cheaper rates. The excess production is done at even a loss to recover the fixed costs,” said a source. Korean and Japanese HR coil cost $355-375 a tonne, though they sell at over $500 in domestic markets, is the claim. The imports have pulled down prices in the domestic market, too.
After the verification process, the directorate general would decide whether to initiate an inquiry, after which it would need to notify the World Trade Organization.
The importing countries would then be given an opportunity to be heard. Once the directorate general decides to impose a duty, the Central Board of Excise and Customs would notify it. Unlike anti-dumping and countervailing duty, safeguard measures are applied uniformly on all imports irrespective of source; the other two duties are source-specific.
