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Instead of looking at band-aid solutions (such as higher import duty), Union Finance Minister Arun Jaitley on Saturday asked the highly-stressed domestic steel industry to address the root cause of the problem by increasing its own competitiveness.
"The root cause is that you have to take into account various factors and make our own domestic industry competitive, and when you become competitive, the external factors' ability to adversely affect you is also reduced," said Jaitley, while addressing the conference 'Road map to 300 MT: Opportunities and Challenges for Secondary Steel Producers'.
The Indian industry has been demanding higher import duties, as they fear that the double devaluation of the yuan last week will lead to greater dumping of cheap Chinese steel. Major industry players have also asked the government to impose a safeguard duty on such imports.
"On the one hand, you have the challenge of excess of protectionism as a defensive policy. It can have a spiral impact on user-industries. So, policy-makers will have to do a balancing act," he said.
However, he admitted that China has a huge steel-making capacity, which has a certain amount of price competitiveness. "And, therefore, their capability to flood the world markets is still there," he pointed out.
Last week, the government increased the import duty on select steel products by 2.5 per cent, making it the second such hike within two months.
Earlier, following a steady upturn in cheap imports, mainly from China, the government in June had similarly increased import duty on steel products by 2.5 per cent.
"You have to enable yourself for cost competitiveness hand-holding can take place up to a point. Beyond that point, one has to stand up and run the industry on own strength," he said.
The finance minister also expressed his concern over the spiral effect of stress in the steel sector, which upsets the financial performance of banks, in turn affecting the loan available to other sectors.
The import duty on long products will now be 10 per cent, from the earlier 7.5 per cent. Non-alloy flat products and specified alloy steel products will now attract import duty of 12.5 per cent. There is no change in the duty on stainless steel flat products, currently at 7.5 per cent.
