Govt defers decision on safeguard duty on steel items

New Delhi, May 11; In what appears to be a victory for users, the Government has deferred a decision on a proposal to impose provisional safeguard duty on hot rolled coils/sheets/strips. It said the matter needs to be examined further after taking views of the consuming industry.

“We felt that not enough homework had been done and there is a need to consult both the domestic industry and other interested parties concerned. We have asked the Directorate General on Safeguards (DGS) to consult the domestic user industry and come back to the board after 60 days (with recommendations),” Mr G.K. Pillai, Commerce Secretary, told reporters after a meeting of the Standing Board on Safeguards. Mr Pillai heads the board.

The Steel Secretary, Mr P.K. Rastogi, said there was no urgency to consider the safeguard duty. The interim proposals of the DGS were found to be “insufficient”, he noted.

Asked if there could be any injury to the local industry in view of non-imposition of the safeguard duty, Mr Pillai said, “From the evidence we do not see any threat to the industry”. He also highlighted that steel users had brought to the Government’s notice that they had appealed to steelmakers to further reduce steel prices, matching import prices.

“We were expecting a decision. Imports were being allowed at very low prices. The advantage of whatever demand was generated from stimulus package was going to Ukraine and Chinese companies,” a spokesman for Ispat Industries said.

The Director-General (Safeguards) had in April 2009 recommended a provisional safeguard duty of 25 per cent on imports of hot rolled coils/sheets/strips up to the cost, insurance and freight (CIF) value of $600 a tonne, considered a reasonable benchmark.

In India, there are currently five producers who have the capacity to produce hot rolled coils/sheets/strips — Ispat Industries, Essar Steel, JSW Steels, Steel Authority of India and Tata Steel. The petition seeking safeguard duty was filed by Ispat Industries and Essar Steel. JSW Steel and Steel Authority of India had supported the petition.

In its preliminary finding, the Director General (Safeguards) had concluded there has been significant increase in imports at low prices. Also, the volume of imports surged in view of steeply falling import prices.

This has impacted the domestic industry prices, which fell from Rs 40,000 a tonne in April-September 2008 to Rs 26,296 in February 2009, and consequently led to a decrease in profits. In fact, the domestic industry suffered significant financial losses and negative return on capital employed, the DGS had concluded.

From the range of 1,000-8,000 tonnes a month, the volume of lower priced imports had suddenly surged to as high as 97,000 tonnes and 1,30,000 tonnes in January and February 2009 respectively, according to preliminary findings. The domestic industry had argued that in February 2009 itself, about 1 lakh tonnes landed at Mumbai port at an average price of $450 a tonne. The import prices started declining from above $1,000 a tonne in August 2008 and have continued to fall even now.