Protection for steel industry must be temporary: CII President

Even in the wake of a clamour for increased protection for the steel industry, Confederation of Indian Industry (CII) President, Naushad Forbes, said that the protective measures should be temporary.

"The long-term objective has to be full integration with free trade around the world. The steel sector has a particular problem at present. China has a massive overcapacity, which is double the total Indian consumption. So, the situation is very skewed. So, you have a temporary problem that needs to be addressed to sustain the local industry. That's what's being done, so you have protective tariffs, but the important thing is that the protection indeed be temporary and not permanent to help the industry sort out problems in the short run and make the industry competitive not only locally but even in China," Forbes said.

The rationale, according to him, was that protection helped the producer, but it was a cost or tax on the consumer.

In the long-term, we have to move away from protection," Forbes explained when asked about protection sought by the steel industry in the wake of cheap imports from China.

He also pointed out that steel users were many more in number than the steel producers and protection increases the cost of goods for consumers.

The Indian government first came out with a safeguard duty last year and then a minimum import price (MIP) for 173 products for a period of six months. The duration of the MIP has been increased further but the list has been pruned to 66 items.

Before extending the MIP, the Directorate General of Anti-Dumping recommended a tax of up to $594 per tonne on imports of hot rolled flat steel products, specifically from China, Japan, South Korea and Ukraine. Also, the Directorate General of Safeguards has proposed a safeguard duty on about 107 steel products on imports from China, Ukraine and Indonesia for a period of two and a half years.

T V Narendran, managing director for Tata Steel India and Southeast Asia, who is also the CII regional chairman, however, said that the Indian steel industry was not unique in seeking protection.

"Before January no one was talking about protection when the import duty was 0-5%. Steel industry worked to make itself competitive despite a high cost of capital and cost of doing business. But when you have a 'Make in India programme, how do you protect investors because end of the day, you put in Rs 200,000 crore in building steel capacity and when you have a problem you don't do anything. Then the question to ask is why would anyone put in capacity in India. And India being a country, which has raw material and market should be an ideal place to make steel. Steel industry has always competed with the rest of the world," he said.

He added that across the world, countries were taking action and it was normal and accepted by WTO. "Anti-dumping takes time and hence the temporary measures," Narendran said.

To drive in the point further, Narendran said, both the Indian industry and the government needs to get better and better at these kind of investigations because we don't do it as often as many other countries.

"Eventually a WTO-compliant measure is an anti-dumping duty, which is a normal trade action. We don't see anything as a long-term. This is an abnormal situation and the government is taking corrective steps," he said.