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Fresh duty hike soon to cut cheap steel imports |
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The government may jack up import duty on different grades of steel to up to 15 per cent to provide a cushion to the domestic industry, which is fast losing market share to cheaper steel coming in from China, Japan and Korea.
Sources in the government said the finance ministry has started a fresh review of steel imports and would consider a duty revision sometime in July. The revision could be graded for flat and long steel products with the overall hike going up to 15 per cent, they said.
Faced with the changed market dynamics, the government on June 16 raised import duty on flat steel products (hot-rolled and cold-rolled coils) to 10 per cent from 7.5 per cent. In case of long products, used by housing and constructions firms, the duty has been raised from 5 per cent to 7.5 per cent.
The finance ministry has a leeway to further hike import duty on steel, as it had raised the limit to which it can increase the levy to 15 per cent from 10 per cent in Union budget 2015-16. “Some form of fresh duty revision could be finalised this month,” a government official privy to the development said.
The hike could be maximum for flat steel products, which have industrial use, and a bit lower for construction steel.
Finance minister Arun Jaitley is also likely to meet the steel and heavy industries ministers over the next few days to discuss the contours of the duty revision. The two will apprise the finance minister of the tough conditions being faced by the domestic industry due to cheap imports. The steel sector, already under stress due to stagnant demand and rising debt burden, is facing stiff competition from cheap steel coming in from abroad with imports rising 72 per cent in 2014-15 to 9.3 million tonne.
South Korea and Japan alone sent 3.5 million tonne during the year. The going has not been good in the first two months of the financial year, with imports rising 55 per cent to 1.67 million tonne during April-May. Considering this surge, the government raised import duty by 2.5 per cent on June 16. The industry has, however, termed the duty hike ‘too little, too late’.
“The hike is not enough and the government should immediately consider raising the import duty level to 15 per cent for which the enabling provision had already been announced in budget. The recent 2.5 per cent increase in import duty is a classic case of too little too late,” said Vishal Agarwal, vice-chairman and managing director of Visa Steel.
He said the government should also consider imposing anti-dumping duty and other safeguards against cheap steel coming into the country from China, Korea and the CIS countries.
“The FTAs with Japan and Korea allow these countries to export steel to us with a duty of mere 1 per cent. The value of steel from these countries comes to around $385 per tonne (cost and freight or C&F) in India, whereas the same steel is sold at $509 per tonne. They have surplus steel that is being dumped in India,” said JSW Steel joint managing director and group CFO Seshagiri Rao.
The duty changes have proved ineffective in the case of countries like Japan and Korea, which have FTAs with India for trading of the commodity at lower rates. About 50 per cent of steel imports come from countries with which India has an FTA.
During June, India slapped anti-dumping duty of up to $316 per tonne on import of certain steel products from three countries, including China, to protect the domestic producers from below-cost inbound shipments.
Sources in the government said the steel ministry is in favour of removing steel from the list of items that can be traded under FTA. In addition, it is also examining a proposal to bring more steel products under the quality control order to prevent entry of low-grade steel. As of now, the ministry has fixed quality standards for 15 steel products.
Source : mydigitalfc.com
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