FOKIA's Concerns Over Steel Safeguard Duty: A Threat to India's Pipe Manufacturers
The Federation of Kutch Industries Association, a prominent umbrella organization for various industries in Gujarat, has voiced strong opposition to the proposed 25% safeguard duty on certain steel imports. The safeguard duty, which is set to target non-alloy and alloyed flat steel products, has raised concerns among pipe manufacturers across India. FOKIA argues that the imposition of this safeguard duty could significantly increase costs for manufacturers and disrupt the growth of the Indian manufacturing sector.
In a letter addressed to Union Finance Minister Nirmala Sitharaman, Nimish Phadke, Managing Director of FOKIA, expressed the industry's grave concerns over the safeguard duty. He highlighted that hot rolled steel plates and coils of API grade are key inputs for producing submerged arc welded pipes, which are critical for transporting petroleum products. The proposed safeguard duty, Phadke argued, would not only raise the price of these steel products but would also distort the duty structure, making it less economical to source domestic steel for pipe manufacturing.
The Impact of the 25% Safeguard Duty on Steel Imports
The safeguard duty investigation, initiated by the Director General of Trade Remedies on December 19, 2024, aims to assess whether the surge in steel imports is damaging domestic industries. While safeguard duties are typically implemented to protect local industries from injury caused by unfair imports, FOKIA argues that this particular safeguard duty will have unintended negative consequences on India's pipe manufacturing industry.
Phadke pointed out that the proposed 25% safeguard duty would increase the total customs duties on flat steel to 32.5%, whereas the customs duty on pipes is only 10%. This results in an inverted duty structure where it could be more cost-effective for manufacturers to import ready-made pipes instead of procuring steel and producing pipes domestically. Such a scenario would undermine the efforts to promote domestic manufacturing and infrastructure development in India.
Risk to Infrastructure Development and Economic Growth
The pipe manufacturing industry is a vital component of India’s infrastructure development, particularly in sectors such as oil and gas, construction, and transportation. The proposed safeguard duty, according to FOKIA, threatens to put the brakes on ongoing and future infrastructure projects. Higher steel prices would likely lead to delays and cost overruns, further hindering the country's ability to meet its ambitious infrastructure goals.
FOKIA’s letter to the finance minister stressed that any adverse impact on the pipe manufacturing industry would have cascading effects on the broader manufacturing sector. The association urged the government to reconsider the imposition of the safeguard duty, particularly in light of the industry's reliance on steel products for key applications like the transportation of petroleum products.
Calls for Exemption or Exclusion of API Grade Steel from Safeguard Duty
In a bid to mitigate the negative impact of the proposed duty, FOKIA has called for an exemption or exclusion of API grade hot rolled coils and plates from the safeguard duty. These products are essential for the production of pipes used in the petroleum and gas sector, and excluding them from the safeguard duty would help ensure that the manufacturing industry can continue to thrive without facing a significant price hike.
Phadke emphasized the need for a holistic approach when considering trade remedies such as safeguard duties. Rather than focusing solely on protecting the interests of primary steel producers, FOKIA advocates for a more balanced view that takes into account the needs of the secondary and tertiary sectors, which rely on steel products for their operations. A failure to do so, he warned, could harm the broader manufacturing ecosystem and hinder India’s economic growth.
FOKIA's Broader Vision for India’s Manufacturing Growth
FOKIA’s letter to the Union Finance Minister underscores the importance of fostering a stable and competitive manufacturing environment in India. The association has consistently advocated for policies that support the growth of the entire manufacturing value chain, from primary steel producers to downstream industries like pipe manufacturing. Phadke’s message to the government is clear: to promote the growth and stability of the Indian manufacturing sector, policy decisions must account for the needs of all stakeholders, not just those in the primary sector.
In addition to advocating against the safeguard duty, FOKIA continues to call for greater support for the domestic manufacturing industry, particularly small and medium-sized enterprises. These enterprises play a crucial role in India’s economic development, contributing to job creation and regional growth. By protecting the interests of pipe manufacturers and other downstream industries, FOKIA believes that India can build a more resilient and self-sustaining manufacturing ecosystem.
