Indian Steel Industry Faces Tensions Over Import Duty Hikes and MSME Concerns

New Delhi, Sep 6 (KNN) India’s steel industry is embroiled in a heated debate over rising import duties and potential trade protectionist measures.

On Wednesday, former Karnataka Chief Minister H.D. Kumaraswamy urged the Finance Ministry to raise the import duty on steel from the current 7.5 per cent to 10-12 per cent.

A day later, Union Commerce Minister Piyush Goyal floated the idea of a "border adjustment tax (BAT)" to curb Chinese steel imports, as domestic steelmakers expressed concerns over "predatory" pricing.

Steel producers argue that Indian-made steel faces price disadvantages due to local taxes such as electricity duty, iron ore duty, and coal cess.

Imported steel, particularly from countries like China and Vietnam, enters India at lower prices due to the absence of similar levies. A trade expert emphasised that BAT would help level the playing field by offsetting these domestic disadvantages.

However, Micro, Small, and Medium Enterprises (MSMEs) have voiced alarm over these proposals. Vinod Kumar, President of the India SME Forum, highlighted that Indian MSMEs often rely on imported steel because large steel manufacturers prioritise exports, drawn by lucrative incentives. "Raising import taxes will push input costs up by 10 to 20 per cent. How will MSMEs survive?" Kumar asked.

Kumar noted that MSMEs typically place smaller orders, which are less attractive to large steel producers compared to bulk export deals. This echoes a broader systemic issue, where MSMEs feel overlooked by domestic manufacturers.

S. Hegde, Managing Partner of Bangalore’s Newcom Technologies, warned that additional duties on steel imports would push MSMEs into crisis. “Where do MSMEs go if steel becomes unaffordable? Should we shut down manufacturing completely?” he questioned.

Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), remarked that while India’s steelmakers seek protection from cheaper imports, such measures risk inflating steel prices across the economy.

He stressed the need for a closer examination of the industry’s financial health to determine whether its struggles are purely import-related.

This debate arises as India became a net steel importer in FY24, marking a trade deficit of 1.1 million tonnes. The top exporters to India include China, South Korea, Japan, and Vietnam.

(KNN Bureau)