Revoking of CVD, ADD to hurt earnings of domestic stainless steel industry

Revoking of countervailing duty (CVD) and anti-dumping duty (ADD) on stainless steel products would give China a free hand in dumping cheap imports to the country, industry officials said on Wednesday.

In the Union Budget for FY22, Finance Minister Nirmala Sitharaman announced revoking of countervailing duty on imports of flat products of stainless steel, originating in or exported from Indonesia.

“The problem stainless steel industry faces is that it is mistaken to be part of the steel industry. It is not. It is a separate industry, which is facing dumping from China already since 2017. This move by the government will only give it a free hand to dump in the country via Indonesia,” K K Pahuja, president of Indian Stainless Steel Development Association (ISSDA), told Business Standard.

All steel is iron based, but stainless steel contains chromium at 10 per cent or more by weight. While steel is susceptible to rust, stainless steel is rust resistant. Due to this, stainless steel finds application in areas of high corrosion where steel cannot survive.

“With demand expected to be strong due to thrust on infrastructure projects, traders are expected to stock up cheap imports creating huge inventories in the coming months ahead of an anticipated demand boom in the sector,” said a senior official of a large stainless steel producing company.

State-owned Steel Authority of India (SAIL), Tata Steel and Jindal Stainless among others are some of the players of the stainless steel industry.

“China has 7-8 times of stainless steel capacity of India. By revoking the duty, it makes matters only worse for the domestic market. We will be making representations to the government to undo this. It is a disaster,” explained Pahuja.

However, not all action taken for the iron and steel industry in the Budget has been unfriendly. The reduction of customs duty on steel scrap by 2.5 per cent to nil augurs well for the micro, small and medium enterprises (MSME).

"Reduction of customs duty on scrap will help bring the cost of imported raw material down by around Rs 500 to Rs 600 per metric tonne which will be further beneficial for the MSME industry and reduce their production cost of steel by around 1.5 per cent. This will help strengthen the MSME industry to better compete in the domestic market as well as and provide the opportunity to enhance their market share in the country," said Satish Kumar Agarwal, chairman and managing director at Kamdhenu Group.

Kamdhenu is largely in TMT bars, which find wide application in construction and infrastructure projects. The Rajasthan-based company is also into structural and colour coated steel.

Meanwhile, a reduction of customs duty to 7.5 per cent on semis, flat, and long products of non-alloy, alloy, and stainless steels has no impact on both steel as well as stainless industry.

For stainless steel, the duty was already at 7.5 per cent and hence there is no impact of the same, said stainless steel industry experts.

"Exemption of duty on steel scrap and reduction of customs duty on steel products would benefit the MSME sector. However, the reduction of customs duty on steel products will have no significant impact on the steel industry as most of the steel imported into the country today comes from countries with whom we have an FTA (Free Trade Agreement) and hence they enjoy zero import duty," said T V Narendran, chief executive officer and managing director at Tata Steel.

Source: https://www.business-standard.com