India faces flak at WTO for duty on steel imports

India’s recent decision to impose minimum import price on certain steel items has been opposed by Japan, the EU, Korea, Australia, and Canada at the World Trade Organisation, all of whom have alleged it goes against multi-lateral trade rules.

The countries also criticised safeguard duties imposed by India on steel recently.

While India is yet to formally respond to the complaints, a Commerce Ministry official told BusinessLine that a minimum import price (MIP) was a short-term measure and was generally removed as soon as the deluge in imports subsided.

“There is over capacity in the steel industry worldwide. Many countries are adopting protectionist measures to stop import of the metal. Given the sharp increase in steel import in India, the Centre deemed it appropriate to impose an MIP as a temporary measure (maximum for six months) to check cheap inflows,” the official said.

In its representation at the Goods Council meeting of the WTO, Japan said the MIPs were having a significant adverse impact on exports from the country and were clearly inconsistent with GATT rules. Canada, Australia, the EU and Chinese Taipei also backed Japan’s demand that India should withdraw the MIP.

New Delhi imposed an MIP, ranging from $341 to $752 per tonne, on 173 steel products in February.

It was in response to a surge in steel imports in 2015-16, which increased 25.6 per cent to 11.71 million tonnes (mt), compared to 9.32 mt in 2014-15 in the previous year.

At the recent Goods Council meeting of the WTO, Japan and the EU also raised concerns on the safeguard duties (penal import duties to protect domestic industry against import surges) imposed on imports of hot-rolled flat steel products last year by India.

The representative from the EU pointed out that safeguards are one of the most trade-restrictive tools because they apply to imports from all countries, and that India should have instead initiated an anti-dumping or countervailing investigation on the targeted goods. India, however, believes that it is well within its rights to apply the duties.

“The WTO allows members to impose safeguard duties and we strictly followed prescribed rules to determine safeguard duties on steel products,” the official said.

While the domestic steel industry is happy with the protection accorded to it by the Centre against cheap imports, the user industry, which includes engineering products manufacturers, is worried.

High price of domestic steel is one of the reasons pulling engineering exports from India down, according to the Engineering Export Promotion Council (EEPC). Engineering exports contracted 11 per cent in March.

“Policies like severe import restrictions on steel, a crucial raw material for the engineering products, are aggravating the problems for the engineering exporters,” according to TS Bhasin, Chairman of EEPC.