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 pri