Responding to the Indian government's move to levy 18.95 per cent countervailing duty (CVD) on direct imports from China, companies from that country have started using the Indonesian route to continue dumping stainless steel into India.
Over the past couple of years, investors have installed three million tonnes of production capacity in Indonesia against that country’s total consumption of 150,000 tonnes. Indian stainless steel producers fear that the new capacity installed in Indonesia is primarily coming in from Chinese companies, whose aim is to continue dumping the product into India under the South Asian Free Trade Area (SAFTA).
“The stainless steel industry is facing several challenges such as high cost of finance, regional and free trade agreements (FTAs) signed with partner countries, said Abhyuday Jindal, Managing Director, Jindal Stainless Ltd. He asserted that the capacity build-up in Indonesia is posing another threat to an already beleaguered sector in India.
India has a total stainless steel production capacity of 5.4 million tonnes which is underutilized. With an estimated consumption of 3.2 million tonnes per annum, India’s capacity utilisation stands at around 70 per cent. This means nearly, 30 per cent installed capacity remains idle.
India imports around 0.5 million tonnes of specialized stainless steel and exports an equal quantity annually.
Another challenge that the Indian stainless steel industry facing is the inverted duty structure. India has signed FTAs with Japan and Korea from where finished stainless steel (both flat and long) is imported duty free. By contrast, import of ferro nickel, a raw material, attracts 2.5 per cent import duty.
“Since India does not produce ferro nickel, the government must provide a level-playing field to domestic producers which may promote ‘Make in India’ initiative also,” said Vijay Sharma, Senior Vice President, Jindal Stainless.
On the issue of competitiveness, Jindal said the interest cost on working capital works out to 10-12 per cent in India as compared to 5-6 per cent in China and other competing countries.
“With growing impetus from the government on infrastructure such as railway wagons, coaches, airports, the overall use of stainless steel is set to grow in future,” Sharma added.