The government may further extend its support to the steel industry by imposing higher safeguard duty on a host of steel products that were left out when a 20 per cent levy was imposed last month on hot-rolled coils.
Officials in the steel ministry said they were examining a proposal from the industry to extend safeguard duty on cold-rolled coils (CRC), galvanised products, wire rods and TOR steel.
In September, the government had imposed a 20 per cent safeguard duty for a period of 200 days on imports of hot-rolled coil (HRC) to protect the domestic industry from a surge in cheap imports from China, Korea, Japan and Russia.
Safeguard duty is a WTO-compatible temporary fiscal measure that is brought in for a certain time-frame to avert any damage to a country's domestic industry from cheap imports.
“There is a strong case for extending safeguard duty on a number a steel products that got left out earlier. We have to keep in mind that out of 10 million tonnes (mt) of steel imports last year, HRC comprised just 3.5 mt, while the balance comprised other products. Dumping is also hurting the domestic industry in other product categories,” said Sesagiri Rao, joint managing director and group CFO, JSW Steel.
Faced with changed market dynamics, the government on June 16 raised the import duty on flat steel products (hot-rolled and cold-rolled coils) to 10 per cent from 7.5 per cent. In the case of long products, used by housing and constructions sectors, the duty was raised from 5 per cent to 7.5 per cent. In the same month, government had also slapped anti-dumping duty of up to $ 316 per tonne on imports of certain steel products from Japan, Korea and China. In August, import duty on certain steel grades was further raised by 2.5 per cent.
Sources said after an internal examination by the steel ministry, a formal proposal to levy safeguard duty on CRC, galvanised and long products would be sent to the Directorate General of Safeguards (DGS).
The duty can be levied only after recommendations of DGS are ratified by the standing board on safeguards and the central government concurs to the findings. The levy could be 20 per cent or higher depending on the extent of loss to the domestic industry.
It may be noted that in March, DGS had rejected a demand for imposition of a levy on cold rolled stainless steel products.
“The demand for steel remains sluggish in the domestic market while unrestricted dumping continues. In the first six months of FY16, steel imports are already 40 per cent up and the momentum would continue unless the scope of duty protection is widened,” said an official in SAIL. Imports are largely coming from China, which registered its highest steel exports of 11.3mt in September.
While hot-rolled coils (where safeguard has already been imposed) is the main stay of integrated steel players, cold-rolled coils, long, galvanised and colour-coated products also form substantial chunk of their production. It is largely produced by the industry for meeting the requirements of white good, automobile and construction sectors. This segment is also getting severely hampered by cheaper imports.
The government has identified steel for quick curative action as the Reserve Bank of India in its recent fiscal stability report has placed the sector as having highest incidence of stressed assets. This means lots of advances made to the sector have real chance of turning into non-performing assets (NPAs). As of April, banks have lent about Rs 9.3 lakh crore to the infrastructure sector.
Source: http://www.mydigitalfc.com/