Economy
Steel CVD unlikely as govt aims to cut price pressure
Summary
- The Union steel ministry and DGTR under the commerce ministry had recommended a 19% CVD to the finance ministry, the ultimate authority in duty matters
NEW DELHI : The steel sector may not see a return of the countervailing duty (CVD) despite rising imports from China and a recommendation to impose the levy, two people familiar with the matter said, given the government’s desire to check price pressures in the economy, and the limited-duration validity of the recommendation.
The Union 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 people said, on condition of anonymity, that DGTR recommendations are valid only for three months, and that this one lapses on 5 July, which means the whole process has to begin again.
One of the two people said the government does not want to reintroduce CVD due to the price difference between domestic and Chinese steel, which is 30% cheaper, albeit on account of 20% subsidies provided in China.
A decision against CVD on steel import would come despite China’s contribution increasing to 33% in 200 series stainless steel products, thus, impacting Indian medium and small enterprises. China’s contribution increased by about 12 percentage points from about 21% during the July 21-March 22 period to 33% during April 22-December 22.
The 200 series stainless steel is not used in infrastructure—75% of this product goes into consumer durables and the rest into wielded tubes and two-wheeler accessories.
“One key reason the government does not want the price of this steel to go up is that it would impact common people," the second person added.
A CVD is imposed to protect local companies that cannot compete with cheap imports that gain from subsidies given by the exporting nation. In the face of such imports, domestic steelmakers, especially the smaller ones, are forced to put their hiring and expansion plans on hold and turn traders of the commodity. India used to impose a CVD on steel till the Union Budget for FY22 removed it.
The steel ministry had also supported the implementation of CVD on the grounds that these cheap imports are distorting the market and were of the view that a CVD will protect the industry in India, especially in the small and medium enterprise (SME) sector.
SMEs producing 200 series stainless steel flat products were operating at just 30% of their capacity, as cheaper imports weaken demand for local products. According to industry data shared with the government, these enterprises were operating at less than a third of their 1.5 million tonne (mt) capacity at the end of March, the lowest utilization level in the past six years.
Industry estimates show there are 500 units 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.
