Budget 2022: Steel Industry for continuation of anti-dumping duty

The steel industry is facing a twin blow that could further derail the developing Indian economy. First, it was the announcement of withdrawal of anti-dumping and countervailing duty on certain steel products in the 2021 budget, along with reduction in customs duty.

Now, the government is proposing to further bring down or completely remove import duties on major metals. Notably, China accounts for 50% of steel imports on which Basic Customs Duty is levied. 
 
These measures are not going to provide any permanent relief to steel-dependent industries but will shake the confidence of steelmakers and even more the investors.

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Indian steelmakers are already facing the spiralling costs of raw materials, high electricity duty, double taxation by way of royalty over royalty on iron ore and the impact of the COVID-19 pandemic apart from non-creditable embedded duties and taxes and structural disadvantages.   
 
The steel industry which contributes to two per cent of India's GDP, employing about 7,00,000 people, directly and indirectly, would be disadvantaged if the government pushed for any further reduction or removal of basic customs duties. The steel capacity building as envisaged in the vision of NSP2017 would stand jeopardised. This will have a domino effect on several interrelated businesses, which will hurt the Indian economy. 
 
To provide relief to the domestic steel industry, it is imperative to revert to the pre-budget 2021-22 basic customs duty rates for steel and continuation of the existing anti-dumping duties on countries exporting to India for five years for hot rolled and cold rolled flat steel products. 

The Directorate General of Trade Remedies (DGTR) under the Ministry of Commerce - in two separate final findings issued on 14 September 2021- recommended extending the reference price based anti-dumping duty.  

Currently, anti-dumping duties are in the form of a reference price where no duties must be paid if the costs of import exceed the reference prices. Only when the prices dip below the reference level is when the importer must pay the difference. 

The system acts very cautiously, adding no supplementary burden on steel importers until the import costs are substantially low and are predatory in nature. Moreover, the reference prices are based on the input raw materials and operational costs of 2016, which have now risen by 50 per cent. 

Also Read: Union Budget 2022: Steel industry seeks duty reduction, demand rationalisation

Activation of anti-dumping duty on the landed price of imports if it drops below the reference price will be a safety valve, averting damage to the Indian steel industry. 

This measure will secure investments and employment, therefore preventing bad loans. This will also thwart the possible repetition of the downturn of 2015-16, when India's steel exports fell by 32 per cent while imports rose by 20.2 per cent, compared to the previous year. 

Unfair dumping by the exporters from China, Japan and South Korea during the same period also witnessed the insolvency of several Indian steel companies carrying a cumulative debt of over Rs. 2 lakh crore, burdening the banking sector. 

Anti-dumping duty becomes more relevant in the current climate, as the 'Global Medium-term Demand Forecast' predicts that India is the only country with a 6.2 per cent projected increase in steel consumption during the period 2021-2025. 

This directly hints at the propensity for increased imports into India. Even a percentage increase in steel supply from China, which is about 10 million MT equivalent to one month's consumption in India, would mean mayhem for the Indian steel industry. 

The slew of existing levies and cesses on the domestic industry add up to $80- $100 per MT of steel produced making the price of local produce higher than export-intensive countries like Japan, South Korea, and China.  

The introduction of Remission of Duties and Taxes on Exported Products (RoDTEP) is another measure for striking balance with the competition from strong exporting countries. Similarly, fuel, electricity and logistics costs are higher in India in comparison to the other big steel economies. Implementation of a corresponding Border Adjustment Tax (BAT) would also help arrest the slide. 
 
After the COVID-19 outbreak, governments across the globe announced stimulus packages totalling $20 trillion, a third of which was for infrastructure projects. India also became a part of this infrastructure boom, as the central government laid out a Rs 5.52 lakh crore capital expenditure plan for FY22, with focus on highways, railways, and health, inevitably pushing the steel demand. 
 
Finally, with the global emphasis on building green energy infrastructure, Indian steel industry is confident of meeting the demands of the renewable energy and automobile sectors.  
 
It is important for the government to take right steps at the right time to provide the Steel makers a level playing field. In order to do so, it would need to reduce the levies and continue imposing duties on anti-dumping by export-intensive nations. It is the only way forward to bolster the domestic steel industry and, in turn, keep the Indian economy going. 
 
(The author is Secretary General & Executive Head of Indian Steel Association.)