The Indian government’s decision to impose a safeguard duty of 20 percent on imports of hot rolled flat products of 304 grade stainless steel from China has brought some cheer to Indian manufacturers.
The reason for the ad valorem tax: to protect domestic players.
The duty has been imposed on hot rolled flat products up to a maximum width of 1605 mm, the Finance Ministry said in a notification.
The notification further added that the central government, after considering the findings of Director General (Safeguards), had decided to impose the duty, and it would be effective for 200 days from the date of the notification.
The tax shall also apply to steel products having a minimum nickel content of 6 percent and those containing chromium, with or without the presence of other elements such as molybdenum and titanium, the notice said.
Safeguard duty is a WTO-compatible temporary measure that is imposed by countries to avert any damage to domestic industry from cheap imports.
The government currently levies 5 percent import duty on imports of stainless steel.
While the move may have had a positive effect on the share prices of steel companies in India, some experts remain unsure of its effects and feel it may not help mainline steel producers such as Tata Steel, SAIL and JSW Steel.
In an interview to Moneycontrol.com, Jindal Stainless President and Executive Director Ramesh Nair hailed the tax as a positive move, likely to discourage cheaper imports from China.
He explained that the issue was of dumping, wherein the prices were much lower than that at which the actual cash basis could be arrived. This is an issue faced by all countries across the globe, even in Europe and Brazil.
He added that this would install protection of India’s domestic industry in the hot-rolled segment on the 300 grade series, he added.
It’s important to note that despite India having surplus stainless steel production capacity at about 3.5 million tons per year, imports from China total about 300,000 tons a year because of cheaper rates offered by the Chinese manufacturers.
Among the domestic producers, Jindal Stainless, with a capacity of 1.8 million tons per year, accounts for about 50 percent of total domestic production. Other major players include Salem Plant of SAIL, Viraj Steel and Mukand Ltd.
A Bloomberg report quoting Li Xinchuang, president of China’s Metallurgical Industry Planning & Research Institute, said he was concerned about the move as more and more countries were raising trade barriers amid the weak global economy.