Analysis: How New Import Policy for Steel going to help Domestic Industry?

Last week, the Indian government announced amendment in its import policy for steel under which it made import registrations compulsory under Steel Import Importing System (SIMS) for 284 steel products (including alloy and stainless steel), steel fabricated products, tubes and pipes, railway materials, and articles of iron and steel covered under chapter 72, 73, and 86.

What does it imply?

The SIMS, requires the importer to submit advance information online for import of the identified items and obtain a registration number not earlier than 60th day and not later than 15th day before the expected arrival of the import consignment. The customs clearance of the consignment is subject to the entry of the registration number and expiry date of the automatic registration (validity 75 days).

How it will benefit?

With this system in place, the government is trying to promote fair trade in the domestic steel sector. The prior registration of steel imports under the particular HS code will help the government to track if there is no circumvention of duties in case of imported goods. For e.g. if any particular good is subject to anti-dumping or any other restrictions, trade participants used to import the same under some other name which is free from any barrier and in the absence of any mechanism to track this, those steel items used to be imported freely, making the trade restrictions in effective.

The amended rules under SIMS will also help the Indian steel industry in the long run as it will compress the time taken (in case of data collection) for various trade duties investigations. This will be more applicable in case of anti-dumping duty investigations wherein the interested parties look forward for quick determination and prevent it from serious damage caused by imports.

The steel import scenario of India in the current context has a direct impact on the health of the industry. Apart from value-added items, India is also flooded with cheap imports of standard basic grade which are otherwise abundantly available. These products take away the market share from the domestic players only on price considerations and in most of the cases these are imported as seconds and defectives. With the prior intimation of the arrival of these imports to India, the domestic players could be able to adopt appropriate strategies and can also work upon developing those steel products which are not being produced domestically.

Apart from the steel industry, to know in advance the likely imports of steel and goods containing steel would help the government to know the likely outgo of foreign exchange, the capital goods industry to assess the capabilities and urgency to create capacities to produce these items and steel industry to adjust their production and marketing strategies to combat the impact of the arrival.

Opposition from end-user segment

While the domestic steel players are happy with the new rules, a trade body Engineering Export Promotion Council (EEPC) has raised its concerns with regards to this policy.
The trade body has highlighted that while registration is fine, the importer will have to pay the registration fee also as a certain percentage of imports. Now as steel products are imported in bulk quantities with a minimum lot size of 50-100 tonne, this fee will only add to the importing cost for the importer which is quite discouraging.

Meanwhile, as per the industry reports, engineering exports which accounts for 25% of country's total steel imports have declined by around 2% during April-July. Any increase in the same seems difficult given the fact that the European Union has further slashed the quota on steel products shipped from India. Also, the imposition of Section 232 and withdrawal of Generalized System of Preferences by the US has restricted exports to the major market. Under these circumstances, any rise in import costs or restrictions on steel imports would add to the problems of the engineering exporters, EEPC highlighted.