In response to the rising concerns within the domestic steel industry, India's Ministry of Steel has proposed the introduction of a 25% safeguard duty on imports of select steel products. This proposal comes after a meeting between key ministers, including Union Minister of Steel H. D. Kumaraswamy and Commerce and Industry Minister Piyush Goyal, along with executives from major steel companies like SAIL, Tata Steel, JSW Steel, and AMNS India. The primary aim is to shield local steel producers from the increasing influx of foreign steel, which is adversely affecting their competitiveness.
India's steel imports have surged significantly in recent months. Between April and September 2024, imports reached 5.51 million metric tons (MnT), up from 3.66 MnT during the same period in the previous year. This sharp increase has been particularly noticeable in imports from China, which rose to 1.85 MnT from 1.02 MnT in the year-ago period. This growing trend of steel imports is being driven by the availability of cheaper foreign steel, especially from countries with which India has Free Trade Agreements (FTAs), such as Japan, South Korea, Mauritius, and the ASEAN bloc.
The rise in imports has created significant challenges for domestic steel manufacturers, who have consistently raised concerns about the growing volume of foreign steel entering the Indian market. According to Steel Minister Kumaraswamy, the ministry has been actively engaged with industry stakeholders to address these issues. "We discussed ways for our ministries to collaborate and ensure ease of business for the steel and heavy industries, key sectors driving India's growth," Kumaraswamy said. The focus, he added, is on strengthening the steel industry to make it more competitive globally while promoting innovation and increasing domestic production.
The introduction of a 25% safeguard duty is seen as a critical step to ensure that imports do not harm the Indian steel industry. The proposed duty will apply if the import volumes exceed the quota limits, which are set by the government. The current safeguard measures include an average import duty of 12.5% for steel imports within the prescribed limits. However, imports beyond these limits are subjected to a higher duty of 25%. This structure aims to protect domestic steelmakers from an influx of low-cost steel products, which could undermine their market share.
Despite these efforts, officials have pointed out that the increase in safeguard duties may not have a substantial impact on the level of imports from FTA countries, as steel imports from these nations already enter India at a zero duty rate. Around 62% of India's steel imports come from FTA countries, which means that the proposed duty will not affect these shipments significantly. This raises concerns about the effectiveness of the safeguard duty and highlights the need for careful scrutiny of the FTAs.
One of the major challenges facing India's steel industry is the issue of competition from foreign producers who can export steel at lower prices, often due to government subsidies or lower production costs. Think tank GTRI has raised alarms about some FTAs that allow Indian firms to partner with foreign producers and then re-import steel at concessional rates. This loophole could further exacerbate the competition faced by Indian steelmakers, putting additional pressure on their margins and profitability.
At the same time, the Indian steel industry is grappling with logistical challenges, including port delays and regulatory inefficiencies. According to GTRI Founder Ajay Srivastava, over 10,000 steel user units in India are facing financial strain due to delays at ports and unclear regulatory requirements. The slow processing of steel imports, combined with excessive scrutiny of essential materials needed for manufacturing, has made it harder for domestic users to access critical steel products at competitive prices. These delays are further harming the competitiveness of Indian steel industries, especially small and medium enterprises (SMEs) that rely on timely access to steel for their production processes.
The proposed safeguard duty is part of a broader set of measures that the Indian government is considering to support the domestic steel industry. While the duty increase is a response to the growing pressure from cheap steel imports, there is also a push to enhance domestic steel production capacity and quality. The Indian government and steel producers are looking to find ways to boost innovation, improve production efficiency, and strengthen the global competitiveness of India's steel sector.
India's reliance on steel imports has long been a topic of debate within the industry. While steel is critical for infrastructure development, manufacturing, and economic growth, the influx of imported steel has raised concerns about the health of the domestic industry. The safeguard duty proposal is an attempt to strike a balance between protecting local manufacturers and ensuring that steel prices in the domestic market remain competitive.
The steel ministry’s proposal reflects a growing recognition of the need to protect India's manufacturing base and support the broader economy, especially as the nation works towards becoming a self-reliant economic powerhouse. However, the effectiveness of the safeguard duty will depend largely on how it is implemented, monitored, and whether it can address the structural challenges posed by FTAs and international competition.
