New Delhi [India], April 22 : The 12 per cent safeguard duty imposed by India on certain categories of steel product imports is expected to halt most imports, effectively forcing buyers to shift to domestic suppliers, says a study by Global Trade Research Initiative (GTRI).
It says safeguard duties with high threshold values will also push a price hike.
"12 per cent Safeguard duties with high threshold values are expected to halt most imports, effectively forcing buyers to shift to domestic suppliers. Indian steel companies are likely to exploit this policy to raise prices furthera trend already evident with an 8-10 per cent price increase seen in recent months following news of the safeguard proposal," said GTRI's founder, Ajay Srivatava.
The GTRI study says, the threshold values notified by the finance ministry are significantly higher than prevailing international and domestic prices. This will create a price floor, enabling domestic producers to raise prices closer to the threshold, thereby reducing the competitiveness of foreign steel and compelling buyers to turn to local suppliers.
For example, if the international price is USD 100/MT and the domestic price is USD 120/MT, a safeguard threshold of USD 150/MT incentivises domestic producers to raise their prices to match this level. GTRI study says this pattern is already visible in the notified safeguard order.
The affected products and their respective thresholds are: Hot Rolled Coils, Sheets, Plates (USD 675/MT), Hot Rolled Plate Mill Plates (USD 695/MT), Cold Rolled Coils and Sheets (USD 824/MT), Metallic Coated Steel Coils and Sheets (USD 861/MT), Colour Coated Coils and Sheets (USD 964/MT).
GTRI says the differences between the safeguard thresholds and prevailing prices are substantial. For example, in the case of Hot Rolled Coil, the threshold for imposition of duty is USD 675/MT, while international prices range between USD 444/MT to USD 455/MT and domestic prices from USD 585/MT to USD 632/MT. The difference with international prices is between USD 220-231/MT, and with domestic prices between USD 43-90/MT.
GTRI says with such substantive difference between the safeguard threshold and prevailing prices, along with arbitrary Quality Control Orders (QCOs), could severely harm India's MSME-driven downstream industries.
MSMEs are already struggling with monopolistic practices, high minimum order quantities, and long delays in getting supplier approvals, making them rely heavily on expensive domestic steel.
"Since Indian producers can't meet demand for specialised steels like abrasion-resistant plates, imports are essentialbut the new safeguard duty could raise input costs by 8-10%, just like the recent hikes by local steel mills," said GTRI study
It adds, "At the same time, QCOs create artificial supply shortages that hit smaller firms the hardest, as they lack the resources to comply with these rules."
However, GTRI study says big players are likely to benefit from special exemptions such as met coke import quotas at the cost of MSMEs. This will weaken MSME competitiveness and risks shutting down many firms.
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