Imposing duty on steel a 'knee jerk' action: ISSDA

New Delhi: Industry body ISSDA on Monday termed the government's move to impose duty on steel products as "knee jerk" action which came as a shock to domestic steel industry.

On May 21, the government announced waiving of customs duty on the import of some raw materials, including coking coal and ferronickel, used by the steel industry. Also, the duty on exports of iron ore was hiked by up to 50 per cent and on a few steel intermediaries to 15 per cent. In a statement, K K Pahuja, president of Indian Stainless Steel Development Association (ISSDA), said: "The knee jerk action of imposing 15 per cent export duty came as a shock to domestic steel industry, which was charting new capex plans to meet government's ambitious target of doubling steel capacity to 300 million tonnes by 2030."

The government's objective behind the move was to cool down steel prices. However, the prices anyway had started showing a downward trend, the industry expert said. Pahuja, however, hailed the government's decision to reduce customs duty on certain imported raw materials. The impact of export duty on stainless steel industry is much harsher and unwarranted. In case of flat rolled products of stainless steel of width 600 mm or more (HS Code 2019), the government had already revoked countervailing duty on imports from China and Indonesia since February 2021, facilitating a free flow of subsidised stainless steel flat products from Chinese companies.

The imports from these two countries reached an all-time high of 7,72,000 tonnes in 2021-22, constituting over 25 per cent of the domestic consumption. Indian stainless steel manufactures have been trying to tackle this unfair competition from Chinese companies by raising exports. However, they have been facing protectionist measures, quotas and anti-dumping duty in Europe, Section 232 duty of 25 per cent in US, and now an export duty of 15 per cent has resulted in the squeezing out of domestic producers from all markets, while the Chinese have a free run in the Indian market.

The decision to include a second product, other bars and rods of stainless steel; angles, shapes and sections of stainless steel (HS Code 7222), under the export duty radar is even more perplexing. These products majorly cater the exports markets as their domestic demand is much less than the capacity. In 2021-22, almost 60-65 per cent of this segment was exported, which amounted to 3,45,000 tonnes and worth Rs 8,321 crore. Developed over last 20 years, this niche market and its associated input supply chain are now in jeopardy, without any real benefits to the small domestic market. "The government should have studied the specific stainless steel market conditions before taking a blanket decision of imposing export duty on stainless steel products. The impact on stainless steel industry, which operates on much lower margins than the rest of the steel industry, is much more severe in terms of financial and market losses," Pahuja said.