User MSMEs Fume As Safeguard Duty On Steel Imports To Push Up Costs By 8-10%

New Delhi, Apr 23 (KNN) The imposition of a 12 percent safeguard duty on five categories of steel products could effectively halt imports and compel buyers to purchase from domestic manufacturers, who are set to increase prices following the levy.

According to the Global Trade Research Initiative (GTRI) since Indian producers cannot meet demand for specialised steels such as abrasion-resistant plates, imports remain essential for many industries, the new safeguard duty could increase input costs by 8-10 percent, mirroring recent price hikes already implemented by local steel mills.

Federation of Indian Micro and Small & Medium Enterprises (FISME), the leading MSME body of the country, has termed the decision to impose safeguard duty as a regressive step.

“It is obvious that handful of steel manufacturers have lobbied for greater protection to rake in windfall profits by raising the bogey of Chinese imports”, FISME said.   

FISME warned that this hike will increase cost of production and infrastructure projects across the board.

"The 12 percent safeguard duties with high threshold values is expected to halt most imports, effectively forcing buyers to shift to domestic suppliers," GTRI stated.

"Indian steel companies are likely to exploit this policy to raise prices further, a trend already evident with an 8-10 percent price increase seen in recent months following news of the safeguard proposal," the think tank added further.

The think tank expressed concerns that the Directorate General of Trade Remedies (DGTR) recommended these duties without properly verifying claims of industry injury, despite domestic steel production having grown by 19 percent with high capacity utilisation at 83.90 percent.

"These policies go against the spirit of Make in India. MSMEs drive 33 percent of manufacturing output, but rising input costs and limited supply may push many out of business," said GTRI Founder Ajay Srivastava.

He emphasised, "We always forget that local production is not adequate to meet demand for specialised steel and imports are a necessity for a large number of steel types. This only helps local large steel makers to raise domestic price hurting GDP and exports."

The safeguard duty, combined with arbitrary Quality Control Orders (QCOs), could severely impact India's MSME-driven downstream industries, according to the think tank.

Meanwhile, larger players benefit from special exemptions such as metallurgical coke import quotas, creating an unfair system that undermines MSME competitiveness and threatens the survival of many smaller firms.

"MSMEs already struggle with monopolistic practices, high minimum order quantities, and long delays in getting supplier approvals, making them rely heavily on expensive domestic steel," the GTRI added.

The government has implemented the 12 percent safeguard duty on five categories of imported steel products.

For each product category, a threshold import value has been established, with the duty becoming applicable if imports arrive at values below the specified threshold.

(KNN Bureau)