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The revocation of countervailing duty against subsidised Chinese Stainless Steel imports will hurt the Indian players.
Belying all market expectations, the recent Union Budget of 2022-23 revoked certain anti-dumping and countervailing duty on stainless steel and coated steel flat products, parts of alloy steel, and high-speed steel in larger public interest considering prevailing high prices of metals. The Finance Minister, Nirmala Sitharaman, also extended the custom duty exemption on steel scrap by a year to provide relief to the secondary steel producers in the medium, small and micro enterprises.
It may be recalled that the decision to impose a CVD on China (September 2017) and provisional duties on Indonesia (October 2020), was based on the recommendations of the Director-General of Trade Remedies (DGTR), after a detailed investigation which revealed that the two countries were resorting to non-WTO compliant subsidies to boost their exports to India and causing injury to Indian manufacturers.
The continued suspension (China) and withdrawal (Indonesia) of CVD from these two countries resulted in a massive surge in imports. For instance, the first nine months of 2021-22 witnessed a 68% increase in import volumes of stainless-steel flat products compared to the average monthly imports in the last fiscal. The average per month imports had jumped from 37,318 tons per month in FY21 to 62,867 tons per month this current fiscal–FY 22.
The bulk of the imports came from China and Indonesia, whose share in the overall imports increased by 44% and 103% respectively in the first nine months of this fiscal compared to the average monthly imports of the last fiscal. Today, these two countries have a share of 68% of the total stainless steel flat product imports in the first three quarters of FY 22 compared to the 41% share in FY 21. Indonesia’s average monthly exports increased from 4,301 tons/ month in the last fiscal to 15,331 tons/month in the first nine months of this fiscal, while China’s average monthly exports has jumped from 11,127 tons/month in the last fiscal to 27,187 tons/ month in the first nine months of this fiscal.
It must be appreciated that the production cut in China due to pollution control largely applies to carbon steel plants based on blast furnace routes, and Chinese companies have the option of shifting exports from Indonesia to maintain their market aggressiveness and global dominance. Moreover, the non-WTO compliant subsidies ranging between 20% and 30% to their stainless-steel manufacturers, is causing material injury and persistent financial stress for home-grown businesses.
It is recalled that based on a CVD investigation by the Director General of Anti- Dumping and Allied Duties (DGAD), now DGTR, on subsidized imports of stainless-steel products, the finance ministry on September 7, 2017 notified a 18.95% CVD on import of stainless steel from China for the next five years. Similarly, based on an investigation and subsequent findings by DGTR on subsidised imports of Stainless steel from Indonesia (subsidy on Coal, electricity etc) the Finance Ministry in October 2020, had levied the provisional countervailing duty in the range of 22.31% to 24.83% on certain types of flat products. Subsequently, in January 2021, DGTR recommended a final CVD on Indonesia in the range of 18.83% to 24%.
However, the Central government withdrew the provisional CVD on Indonesia and suspended the CVD on China till September 30, as part of the annual Budget 2021. This decision was extended till January, 2022. And in Union budget 22 these were revoked. There are a few serious implications arising out of this decision.
First, this has left the Indian market wide open under India-ASEAN Free Trade Agreement from Indonesian exports and also exposed to dumping by Chinese companies as already established in DGTR investigation.
Second, as out of the total ongoing remedial action initiated, globally, 70% are on China and 50% on Indonesia, Indian steel industry’s future growth would be largely impeded by unabated import flows from these two countries.
Third, despite the imposition of the CVD, the Chinese and other companies used various methods to circumvent it and continued to dump its products in the Indian market. As a result, the industry (including about one third in MSME) suffered a double whammy: The impact of the Covid-19 lockdown and the surge in imports. There may not be any respite to this scenario in the coming months.
Fourth, the opposition to CVD imposition by a few manufacturers whose business models are based on imported products runs counter to the government’s goal of Atmanirbhar Bharat and Make in India programmes. In a way, it severely hurts the interests of the MSME sector which could have otherwise manufactured and supplied these items indigenously.
Further, with the ongoing Russia-Ukraine crisis, the imposition of level playing field (trade remedial measures) on imports of stainless steel into India becomes all the more critical. As the overall supply chains to Russia is disrupted, Indian producers may not be able to divert the quantities currently being sold in the Russian market to other major markets like EU and USA because of the trade defense measures (including quantity restrictions) imposed by those countries on Indian market. And now they have surplus quantities which they were exporting to Russia. The domestic stainless steel market may also be at risk because China and Indonesia (as suppliers) together account for 50% of the stainless steel consumed in Russia and blocked market access/ supply chain will lead them to divert these quantities to an unprotected market like India (given that they are already blocked out of other markets because of punitive trade defense measures).
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Views expressed above are the author’s own.
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