India Set To Reimpose CVD On Import Of Certain Steel Products

In order to safeguard the interests of local manufacturers and counter the influx of cheap imports, the government is considering the reintroduction of anti-dumping duty on certain stainless steel imports. It seeks to counter the challenges posed by imports that have gained an advantage from substantial import subsidies.

The proposal, which has gained support from the Union Steel Ministry, came after the Union Finance Ministy received a recommendation from the Directorate General of Trade Remedies (DGTR), the investigation arm of the Union Commerce Ministry, for imposition of countervailing duty (CVD) to the extent of 18.95%.

The suggestion came after DGTR conducted a sunset review investigation in April-May this year on imports of hot-rolled and cold-rolled stainless steel flat products imported from China. The duty is to be imposed on certain flat-rolled steel products imported from China for five years to guard domestic manufacturers against subsidised imports.

In its findings, the directorate has concluded that the Chinese imports are undercutting the domestic prices and there is a likelihood of continuation of subsidisation on the products by China if the existing CVD was discontinued in the light of the surplus capacities maintained by the Chinese producers.

What is CVD

The anti-dumping or countervailing duty is a measure typically employed to shield local companies from the adverse effects of cheap imports that benefit from subsidies provided by exporting nations. By levying a duty on such imports, the aim is to restore a level playing field and prevent unfair competition that could harm domestic manufacturers, as in the case of stainless steel imports.

How domestic steelmakers are affected

The surge in cheap imports has had a detrimental effect on domestic steelmakers in India. These imports, particularly from countries like China and Russia, have distorted the steel market by flooding it with subsidized products.

As a result, smaller local companies have been compelled to put their hiring and expansion plans on hold. Instead of focusing on growth, they have been forced to navigate the role of traders in the commodity. This situation has hampered the growth and competitiveness of domestic steel manufacturers.

Russia's entry

While imports from China have historically been high, Russia has emerged as a notable exporter of steel to India. This shift occurred when traditional European markets imposed economic sanctions on Russia following its invasion of Ukraine. Since then, Russia's exports to India have steadily increased, contributing to the challenges faced by domestic steelmakers.

Reintroducing the duty

India had removed CVD in its Budget for the fiscal year 2021-22. The steel industry has long called for the reinstatement of the duty due to the continued impact of imports on small and medium enterprises. These enterprises have experienced a significant decline in their capacity, with some even facing closure. The CVD is seen as a crucial measure to help revive and stabilize these enterprises.

It was earlier expected that the reopening of the Chinese economy would ease imports from China and other countries. However, the anticipated reduction in imports has not yet materialized. Steel consumption in China and other key economies remains stressed, which has sustained the high volume of exports to India. Hence the fresh proposal.