The industrial sector in Punjab is voicing strong opposition to the steel ministry's proposal of imposing a 25% safeguard duty on steel imports. Various industrial bodies have come together to highlight the severe consequences they believe this policy could have on the state’s economy. According to leaders in Punjab’s industrial community, the new duty would not only harm local businesses, but also negatively impact downstream industries like construction, automotive, and manufacturing, all of which heavily rely on steel. The proposed duty, they argue, would increase the cost of production, making it difficult for small and medium enterprises (SMEs) to stay competitive in both domestic and international markets.
At a press conference held in Ludhiana, industrialists warned that the imposition of the safeguard duty would create a ripple effect across various sectors. Industries that rely on affordable steel imports, such as construction, automotive, and manufacturing, would see a significant rise in production costs. This increase would make their products less competitive, both within India and abroad. With steel prices on the rise, businesses would be forced to pass these costs onto consumers, ultimately reducing their market share and profitability. For many, especially SMEs and MSMEs, this could spell financial disaster.
In addition to higher production costs, the industrialists raised concerns that restricting steel imports would reduce competition in the steel sector, ultimately benefiting domestic manufacturers at the expense of end-users. They argue that with fewer imports available, local steel manufacturers might raise prices without any competitive pressure, leading to inefficiency in the market. This, in turn, would result in even higher costs for consumers and businesses, making it more difficult for companies to maintain profitability and grow.
The potential negative effects of the proposed safeguard duty go beyond just the industrial sector. Several experts are concerned that the duty could seriously disrupt India’s infrastructure development plans. India has been undertaking ambitious infrastructure projects aimed at boosting its economic growth, including roads, bridges, and housing. Industrialists fear that the rise in steel prices could lead to significant delays and cost overruns in these projects, slowing down the progress of the nation’s development goals. With infrastructure projects being vital for economic growth, any setback in their execution could have long-lasting implications for the Indian economy.
Upkar Singh Ahuja, president of the Chamber of Industrial and Commercial Undertakings (CICU), expressed concern over the potential impact on GDP growth. With manufacturing output already at an 11-month low, he warned that the safeguard duty could further hinder India’s economic performance. The country’s GDP growth currently stands at 5.4%, and industrialists fear that the new policy could push it even lower. The duty is expected to squeeze profit margins for businesses, especially SMEs, which may lead to widespread closures, resulting in a spike in unemployment and inflation. These adverse effects could severely strain the Indian economy, particularly at a time when recovery from the pandemic’s economic fallout is still underway.
Industrialists also pointed out the adverse effects the safeguard duty could have on the competitiveness of Indian businesses in the global market. As costs rise due to higher steel prices, products manufactured in India could become more expensive compared to those made in other countries. This would reduce India’s exports and its ability to attract foreign investment. For a country that is striving to increase its share of global trade, such a scenario could be detrimental to its long-term economic goals.
While the steel ministry’s proposal is intended to protect domestic steel manufacturers from an influx of cheap foreign steel, industrialists argue that the policy does not take into account the broader economic impact. They contend that a more balanced approach, one that takes into consideration the needs of downstream industries, would be more effective. Rather than imposing a safeguard duty, they propose exploring other measures to support the steel industry, such as increasing domestic production capabilities or encouraging technological upgrades that can make steel production more cost-effective.
The ongoing debate over the safeguard duty is reflective of the broader challenges facing India's industrial sector. On one hand, the government is keen to protect domestic industries, but on the other, the policy could have unintended consequences for businesses and the economy. As the issue continues to unfold, it is clear that finding a solution that balances the needs of steel manufacturers with the demands of other industries will be crucial for maintaining India’s economic stability and growth in the years to come.
