Politicians seem to get wiser when they are out of power. It was the Congress-led UPA that sealed the comprehensive economic partnership agreements (CEPA) with South Korea and Japan, which are now being blamed for the spurt in steel imports. Ironically, it is Congress MP Jyotiraditya Scindia, among others, who is putting pressure on the ruling-BJP to remove the favourable provisions on steel imports in the free trade pacts, to save the domestic industry from unfair competition. The losses suffered by domestic steel producers, including PSUs, due to low global prices and cheap imports, is understandably a matter of concern. The steel sector has become one of the largest contributors to rising NPAs with banks.

Although the import of steel in the first quarter of the ongoing fiscal declined by 30 per cent to 1.8 million tonnes (after increasing by a whopping 71 per cent in 2014-15 and 24 per cent in 2015-16) due to various measures taken by the Government such as imposition of safeguard duties and a minimum import price, domestic units are still operating way below capacity. Moreover, the MIP imposed to prevent imports below a certain price is due to lapse two days from now. Once the MIP is removed, it would be difficult to curb cheap inflows from South Korea and Japan because of the favourable duties they enjoy under the CEPA.

One saving grace could be notification of anti-dumping duties on some steel products recommended by the directorate general of anti-dumping. However, to what extent such duties serve to check imports remains to be seen. Scindia does make a point when he criticises the BJP government for wanting to broaden the CEPA with South Korea and Japan and asks it to instead review the pacts to restrict steel imports. But what he needs to answer is why his government did not do its homework before settling for such provisions in the free trade pacts.

Deputy Editor

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