'Safeguard duty on steel counterproductive'

17 November 2015

Multi-national companies with interest in India such as Posco, Maruti Suzuki, Hyundai and ArcelorMittal Brasil along with Indian industry on Monday made a strong pitch against the imposition of safeguard duty on steel. They argued the move would be counterproductive to the government's Make in India campaign and that it would impact foreign investments coming to India.

The public hearing called by the Director General of Safeguards (DG Safeguards) on Monday also saw participation from country delegations and embassy representatives. These included the European Union, Japan, China, the Ukraine, the Russian Federation, Taiwan and Brazil. India has a free trade pact with South Korea and Japan, under which the countries enjoy substantial duty benefits on steel imports. Posco and Hyundai argued the steel imported from South Korea is for captive use and not for domestic sale that could have an impact on the domestic steel companies.

Posco contended it was forced to import from its parent company in South Korea as the local plants in India declined to supply steel products due to their own inability to produce the required quality and quantity.

Posco alone imported nearly 950,000 million tonnes of hot-rolled steel between May 2014 and September 2014, accounting for 30 per cent of total imports of the raw material. If excluded from the total steel imports, there is no surge in steel imports, it argued.

In all, there were 29 presentations from Nippon Steel, Posco Maharashtra, Posco Korea, Mitsui, Hyundai Steel, Hyundai Motors, China iron and Steel Association, Federation of Industries of India, Federation of Association of Maharashtra, RKB global and Tube Products of India, among others.

DG Safeguards, Vinay Chhabra, asked interested parties to make written submissions by November 23. The government will take a final decision on the duty by February after hearing all interested parties. In September, the government imposed a 20 per cent safeguards duty for 200 days on the import of hot-rolled flat products of non-alloy and other alloy steel, in coils of a width of 600 mm or more. The decision was taken on the basis of preliminary findings and the recommendations of the DG Safeguards, which comes under the revenue department of the finance ministry.

Nippon Steel argued the steel required for auto production should be exempt from safeguard duty as the domestic industry does not have the capability or the technology required for production.

Tata Steel, Jindal Steel and Bhushan Steel supported the three petitioners - JSW Steel, Essar Steel and the Steel Authority of India.

"Hot-rolled coil is consumed as a basic raw material by many downstream engineering units in the country. Hence, the levy contradicted the government's initiatives like 'Make in India', ease of doing business and Sabka Saath, Sabka Vikas," H L Bhardwaj, secretary-general of Federation of Industries of India, argued in his presentation. He added the imports made before the safeguard duty notification but delivered later must be exempt from the levy.

The Federation of Association of Maharashtra noted the petitioners in the case, such as JSW and SAIL, have made profits.

Safeguard duty is allowed under World Trade Organization rules as a temporary measure for a specified period to check damage to a country's domestic industry from cheaper import. The market share of steel imports doubled from six per cent to 12 per cent in absolute terms between 2013-14 and 2015-16, preliminary findings showed.

Japan, South Korea and China accounted for about half the iron and steel imports into India in the first six months of the financial year, worth about $3 billion. Imports made up five per cent of the country's total production of the under-investigation steel products (hot-rolled coil) in the year to end-March 31, 2014.