India Imposes Safeguard Duty on Steel Imports

The Government of India has recently implemented a provisional safeguard duty of 12% on key steel products. This decision comes after increase in imports, particularly from China. The safeguard duty will last for 200 days and will be subject to review. This move follows a probe by the Directorate General of Trade Remedies (DGTR) in response to complaints from domestic steel manufacturers.

Background on Steel Imports

India has faced challenges with steel imports, remaining a net importer for the second consecutive year in FY25. Finished steel exports were recorded at 4.9 million tonnes, while imports reached 9.5 million tonnes. The surge in imports has raised concerns about below-cost pricing from countries like China, South Korea, and Vietnam.

Details of the Safeguard Duty

The 12% safeguard duty applies to various steel products, including hot rolled coils, sheets, plates, and colour coated coils. The Central Board of Indirect Taxes and Customs issued the notification. Notably, if the import prices exceed specified thresholds, no safeguard duty will be applicable. For instance, hot rolled coils priced above $675 per metric tonne will be exempt.

Exemptions and Impact on User Industries

Certain exemptions have been put in place to alleviate concerns from user industries. Speciality steels, such as tinplate and stainless steel, are exempt from the duty. This decision aims to prevent an increase in input costs for industries reliant on these materials, including automotive and construction sectors.

International Context and Trade Relations

The safeguard duty coincides with the United States imposing a 25% additional tariff on steel and aluminium imports. India has challenged these tariffs at the World Trade Organization but is also seeking a bilateral resolution with the US. Talks are anticipated to occur soon.

Future Considerations

The safeguard duty is provisional as the DGTR’s investigation continues. The final decision will depend on the investigation’s outcomes. The government aims to address dumping issues while preparing for a potential surge in imports due to international tariff changes.

Questions for UPSC:

1. Critically analyse the impact of safeguard duties on domestic industries and consumer prices.
2. What are the implications of the US steel tariffs on global trade relations? Discuss.
3. Estimate the potential effects of increased steel imports on India’s manufacturing sector.
4. Point out the key factors influencing India’s steel import trends over the last decade.

Answer Hints:

1. Critically analyse the impact of safeguard duties on domestic industries and consumer prices.

1. Safeguard duties aim to protect domestic industries from unfair competition and dumping.
2. They can stabilize prices for local manufacturers by reducing the influx of cheaper imports.
3. However, they may lead to higher prices for consumers due to reduced competition.
4. Industries reliant on imported steel may face increased costs, impacting their pricing strategies.
5. Long-term effects could include improved domestic production but potential trade retaliation from affected countries.

2. What are the implications of the US steel tariffs on global trade relations? Discuss.

1. The US tariffs create tension in international trade, prompting retaliatory measures from affected countries.
2. They can disrupt global supply chains, leading to increased costs and delays in production.
3. Countries may seek to negotiate bilateral agreements to mitigate tariff impacts, as India is doing.
4. Such tariffs can encourage countries to boost their domestic industries, leading to a shift in trade dynamics.
5. Long-term implications may include redefined trade partnerships and increased protectionism globally.

3. Estimate the potential effects of increased steel imports on India’s manufacturing sector.

1. Increased steel imports can lead to lower production costs for manufacturers using steel as input.
2. However, excessive imports can harm local steel producers, potentially leading to job losses.
3. Manufacturers may become dependent on foreign steel, risking supply chain vulnerabilities.
4. Local industries may struggle to compete if imported steel is priced lower.
5. Increased imports can stimulate growth in sectors relying on steel, such as construction and automotive.

4. Point out the key factors influencing India’s steel import trends over the last decade.

1. Global demand and supply fluctuations impact India’s steel import levels.
2. Pricing strategies from exporting countries, particularly China, affect import decisions.
3. Domestic production capacity and technological advancements influence import reliance.
4. Government policies, including tariffs and trade agreements, shape import dynamics.
5. Infrastructure development and urbanization trends drive increased steel demand in India.