NEW DELHI : The Prime Minister’s Office (PMO) has initiated discussions on the potential imposition of countervailing duty (CVD) on stainless steel, raising hopes within the industry that such an action will curb cheap imports from China and support small and medium producers in India, two people familiar with the development said.
The PMO has started talks with the industry and the ministries of steel and commerce, the people said, requesting anonymity. “The PMO has sought details on the impact of not implementing CVD on local producers,” one of the two people said.
The PMO intervened after the finance ministry ruled out imposing the duty to offset the effects of subsidies provided by foreign governments to their producers despite the steel and commerce ministries supporting the implementation, Mint reported on 2 July.
The PMO is concerned about the impact of cheaper imports on local producers. Industry data showed that small and medium enterprises (SMEs) manufacturing 200 series stainless steel flat products, the product being dumped by Chinese producers, are operating at only 30% of their capacity. By the end of March, these enterprises were utilizing less than a third of their 1.5 million tonnes (mt) capacity, the lowest in the past six years.
As cheap imports flood the market, domestic steelmakers, especially smaller ones, are freezing hiring and expansion plans and resorting to commodity trading. India had previously imposed CVD on steel, but removed it in the Union Budget 2021-22. China’s contribution to stainless steel imports surged from around 21% during the July 2021-March 2022 period to 33% during the April 2022-December 2022 period, impacting India’s SMEs.
The steel ministry and the Directorate General of Trade Remedies (DGTR) under the commerce ministry had recommended a 19% CVD to the finance ministry, the ultimate authority in duty matters. The steel ministry supported the implementation of CVD on the grounds that these cheap imports were distorting the market, stating the duty would protect the local industry, especially small and medium manufacturers.
A possible implementation of CVD will bring cheer to about 500 SMEs and about 60 producing companies with a capacity of about 1.5 mt, generating direct and indirect employment for more than 400,000 people. These units are located mainly in Gujarat, Himachal Pradesh, and around Delhi and have either stopped production or are operating with reduced capacity as demand for Indian produce declined due to the availability of cheap imports. “Many of these units have not just stopped, but a lot of them have moved to trading to survive,” said a second executive.
Industry executives added that the price of 200 series stainless steel imported from China is 30% cheaper than domestic steel, albeit on account of 20% subsidies provided by its government.
This steel primarily serves consumer durables companies, with the remaining portion used in welded tubes and two-wheeler accessories.
Another official said that the government is cautious about reintroducing CVD as it could impact the prices of consumer durables.
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Updated: 25 Jul 2023, 12:12 AM IST