User industry lobbying led to steel duty cuts

EXIM MATTERS

The government has slashed the import duty on steel items to 15 per cent and the excise duty to 8 per cent on locally produced steel.

The Duty Entitlement Passbook (DEPB) scheme on the export of steel has also been suspended for three months.

This is perhaps the first time, at least in the recent memory, the government has heeded to the protests of the user industries about the steep rise in the prices of their inputs.

The cartel of steel producers overplayed its hand by raising steel prices by over Rs 4,000 per MT a week back.

They ended up hurting the big players in the auto sector, consumer durable sector, construction sector and other engineering industries. This time, the steel users lobby turned out to be stronger.

Steel producers have always lobbied successfully to maintain high levels of tariff and non-tariff barriers on imports. In addition, they have also succeeded in getting anti-dumping duties levied at will.

The government played along till the glut in the steel sector and the fall in steel prices justified the protection. Of late, however, China has been picking up steel from everywhere and the demand has picked up globally.

Last October, the government dismantled the non-tariff barriers that required registration with Bureau of Indian Standards by those who wanted to export steel to India. This week, the government has cut taxes and export subsidies for steel items.

The larger point, however, is that the government usually is quite liberal with protection to large industries that produce basic materials leaving the user industries in the lurch.

The chemical sector, in particular, is a major victim of anti-dumping and safeguard duties with actions in respect of materials like Caustic Soda, Phenol, Ammonium Nitrate, Aniline, Sodium Nitrite, Bisphenol, Citric Acid, Hexamine, Hydrofluoric Acid, Acetone, Isopropyl Alcohol, Propylene Glycol, Oxo Alcohol etc. are produced manly by large industries but used by any number of small industries.

Under the anti-dumping law, definitions of 'like products', 'normal value', 'dumping', 'material injury' etc. have been so loosely interpreted that any cartel of large producers could easily buy protection for five years by getting anti-dumping duties levied.

Although the user industries are heard during anti-dumping investigations, the law does not mandate a consideration of whether they will survive the adverse impact of anti-dumping measures.

India is one of the highest users of anti-dumping measures with over 150 actions. Even imports from Nepal have not been spared.

These anti-dumping measures have boosted the bottom lines of some large companies whose shares are quoted in stock exchanges but many smaller user industries have been vanishing.

This has been hitting the overall employment in the economy. It is a moot point whether the economy has suffered due to dumping or anti-dumping.

Last year, the anti-dumping directorate came out with a report claiming that anti-dumping duties had not hurt the user industries, but doubts still persist.

Now that the government has decided to take a look at the travails of the user industries in the steel segment, it will be worthwhile to take a fresh look at all the protective actions on the pretext of anti-dumping that hurt the user industries in other sectors too.

Hopefully, the actions in steel sector will be a pre-cursor to a more sympathetic consideration of the plight of smaller user industries that are victims of protection to larger industries.

Email : tncr@sify.com