Proposed 25% Steel Duty Hike Faces Criticism for Ignoring MSME Woes

New Delhi, Dec 5 (KNN) Proposals to increase steel import duties by 25 per cent to shield domestic manufacturers from surging imports and dumping by China have drawn sharp criticism from small industries and trade experts. 

According to Federation of Indian Micro and Small & Medium Enterprises (FISME) the lobby led protectionist tariff and non-tariff measures against import of steel including anti-dumping, safeguard duties, quality standards etc, play out in a triple whammy for MSMEs in India. 

“Firstly, the steel producers increase the cost of domestic steel by similar measure as  extra protection, increasing cost of the produce of MSMEs. As MSME products do not enjoy a similar higher tariff/ non-tariff wall imports become cheaper and displace their produce from domestic market. Secondly, although 
MSMEs can technically import duty free inputs for exports, their small volumes make imports unviable, rendering them uncompetitive for exports also”, says Anil Bhardwaj, Secretary General, FISME. 

Due to imports restrictions steel producers face little competition from imports (both on quality and price) they export best quality material and sell poor quality material in domestic market elbowing out MSMEs from quality conscious supply chains also, he added. 

Pankaj Chadha, Chairman of the Engineering Export Promotion Council (EEPC) of India, cautioned that such a move would severely impact micro, small, and medium enterprises (MSMEs), which are already grappling with numerous challenges.

“MSMEs are excluded from consultations on trade-related issues in the steel sector,” Chadha said. “If we’re protecting steel producers, we must also safeguard the 8 lakh MSMEs that depend on steel. Ignoring their plight will hurt the downstream industry.” 

Chadha emphasised that MSMEs contribute to 50 per cent of EEPC’s export value, with 60 per cent of its membership comprised of these smaller businesses.

Chadha further noted that delays in issuing no-objection certificates (NOCs) for imports, such as Japanese steel shipments, have caused shortages, with products stuck at ports for three months. “These inefficiencies add to the burden on MSMEs, which already struggle to compete internationally,” he added.

The Global Trade Research Initiative (GTRI) also weighed in, noting that India’s steel imports are largely essential. Half of these imports are critical raw materials for domestic production, while 40 per cent are specialised items not produced in adequate quantities locally. 

“Restrictive import policies hurt industry growth and illustrate inefficiencies in India’s business environment,” the GTRI report stated.

Ajay Srivastava, GTRI’s head, highlighted the monopolistic tendencies of large steel producers. “Despite claiming hardships, these firms enjoy protective policies and charge 25–30 per cent higher prices for domestic stainless steel compared to imports,” Srivastava said. 

He called for the Competition Commission of India (CCI) to investigate major firms' practices, which he argued have forced many MSMEs to shut down despite the steel giants posting record profits.

As consultations continue, experts urge balanced measures that consider the interests of both steel producers and downstream industries to ensure holistic economic growth.

(KNN Bureau)