Say it will result in increase in prices of their products.
With the Indian economy still recording the second fastest growth rate, it has become a favourite destination for overseas producers, resulting in a surge in imports of certain products.
Domestic producers of some goods have approached the government to impose safeguard duty — an emergency import duty — as a quick measure to counter foreign goods. This has resulted in initiation of 13 investigations by the Directorate General of Safeguards (DGS) under the finance ministry, a precursor to imposition of safeguard duty, just in four months ending April.
Significantly, the end users of these imported products in India have also started protesting against these duties, with some even resorting to legal recourse.
The DGS has so far recommended provisional safeguard duty for 200 days on 11 products, including Hot Rolled Coil (25 per cent), while the Central Board of Excise and Customs has imposed the duty on Soda Ash (20 per cent from China), Aluminum Flat Rolled products (21 per cent) and Phthalic Anhydride (25 per cent).
“We will appeal to the government to revoke the safeguard duty on soda ash. I am sure the government will listen to us. While investigating the safeguard duty on the product, our comments were not taken,” said Venugopal Dhoot, chairman of Videocon Group. Videocon manufactures picture tubes, which have soda ash as a significant input material.
Small and medium industries are also a worried lot as many of them are users of some of the products on which the additional import duty has been imposed. “We do not have any option to initiate legal action against safeguard measurers. Imposition of safeguard duty on Hot Rolled Coils will impact small factories adversely, as prices will increase. In fact, steel prices have already gone up by Rs 1,000 a tonne from May, even before the duty has been imposed,” said P D Sharma, president of Ludhiana-based APEX Chamber of Commerce and Industry, which represents manufacturers of cycles and auto parts among others.
Government officials involved in the process of Safeguards Investigations accept that users of these imported products will be adversely affected, but maintain that no rules were overlooked in the process.
“The safeguards process is transparent. For example, it is not mandatory to ask for comments from the end users while investigating whether a provisional safeguard duty should be imposed or not. But the DGS went ahead and asked for comments. They should understand that asking for comments does not mean that the DGS will accept them,” said a government official involved in the process. He added that the duty was only provisional — for a period of 200 days. If found unjustified, it would be revoked and the money reimbursed, he added.
On their part, domestic producers have also made their case strong by producing the imports data, which suggest that large volumes of the products are flooding the market, resulting in a price crash.
While soda ash makers like Tata Chemicals claimed in their petition to the government that the share of Chinese Soda Ash in the domestic market increased from about 3 per cent in the April-September 2008 period to more than 10 per cent in the October-December period.
Flat-rolled producers like Ispat Industries, Essar Steel and JSW Steel told the government that they had to reduce prices by half between September 2008 and February 2009.
End users of imported products where additional duty has been levied say that it would lead to an increase in domestic prices. “Analysis shows that when prices of these imported products were decreasing, the importers and end users did not pass on the benefit to the customers,” said the government official.
Safeguard duty is preferred over anti-dumping duty to halt imports into the country as the latter involves a process that could take as long as six months. Even though the broad parameters of both the trade protectionist measures are same, in case of anti-dumping duty the complainant has to prove that the landed price of the imported product is less than the production cost in the originating country.
India tops the list of countries initiating anti-dumping measures, according to the World Trade Organization. The country took measures in as many as 42 cases in the July-December period of 2008. Sources say more protectionist measures are in the offing as the government is processing more complaints from domestic producers.
