The Indian Steel Ministry has proposed doubling the basic customs duty (BCD) on steel imports from the current 7.5% to 15%, citing a significant surge in imports from China. This recommendation, aimed at protecting domestic steel manufacturers, was detailed in a letter sent to the Finance Ministry by Union Steel Secretary Sandeep Poundrik. The ministry’s internal assessment indicates that Chinese imports now account for nearly one-third (33%) of India’s total steel imports, posing a threat to local industry dynamics. This is the first time the Steel Ministry has officially acknowledged the sharp rise in Chinese steel imports, which industry experts have labelled as dumping. The letter compares India’s situation to similar actions taken by the European Union and the United States, which have implemented safeguards to counter unfair trade practices. The Ministry’s report highlights that many new steel capacities in the region are driven by Chinese investments aimed at export markets like India. It also raises concerns about steel shipments being diverted from ASEAN nations, particularly Vietnam, which benefits from zero customs duty under the India-ASEAN Free Trade Agreement (FTA). The letter also points to the misuse of India-ASEAN FTAs, which are being leveraged to route cheaper Chinese steel through South Asian nations. “The current import price of steel products from China is significantly lower than domestic prices even with a 7.5% BCD. Our analysis shows that even if the duty is raised to 12.5%, Chinese steel would still undercut domestic prices,” the Steel Secretary noted. In September 2024, the average price of hot rolled coils (HRC) in India stood at Rs 48,200 per tonne, while similar steel from China was priced at $462 per tonne, and from South Korea at $500 per tonne, according to market consultancy BigMint. India has been a net steel importer in FY24, with imports rising by 34% to reach 3.72 million tonnes (mt) in the first five months of the fiscal year (April-August). The trade deficit for this period widened to Rs 149.11 billion, with HRC and cold rolled coils (CRC) being the primary imported categories. The letter underscores that despite increased domestic steel production, rising imports are displacing locally produced steel, leading to market disruptions. The Steel Ministry emphasised the need for higher import duties to safeguard domestic investments and prevent potential losses in the sector. Steel, with its significant multiplier effect on GDP (1.4x) and employment (6.8x), is a crucial component of the Indian economy. The letter warns that nearly Rs 75,000 crore of capital expenditure is “under threat” due to disruptions in the investment cycle. The ministry’s analysis also showed that ASEAN countries currently consume around 75 mt of steel—25 mt from imports and 50 mt from domestic production. With steel production capacities expected to rise from 78 mt to 104 mt in the coming years, Chinese exports are likely to flood these markets and could be redirected to India through FTAs. The Steel Ministry has urged the Finance Ministry to consider these factors and implement higher duties to protect the domestic steel industry from the growing influx of low-priced Chinese imports. (Business Line)