MSME steel players may urge Centre not to impose 12% safeguard duty fearing price rise

Commerce Ministry's investigation arm Directorate General of Trade Remedies (DGTR) on March 19 recommended imposing 12-percent provisional safeguard duty for 200 days on certain steel products

A section of Micro, Small and Medium Enterprises (MSMEs) plan to approach the Centre, urging them to not implement the proposed provisional safeguard duty on certain steel products citing increase in production costs, which they fear may lead to higher domestic prices, Moneycontrol has learnt from industry voices.

"We will approach the government and say this will lead to cascading effect on raw materials and will impact MSME exporters, we had written before, we will write again," an industry representative said on condition of anonymity.

Following months of investigation, the Commerce Ministry's investigation arm Directorate General of Trade Remedies (DGTR) on March 19 recommended imposing a 12 percent provisional safeguard duty for 200 days on certain steel products with the aim to protect domestic players from a surge in imports.

The recommendation requires the Finance Ministry's approval before they are implemented.

The source added that domestic steel prices could go up by 8-10 percent due to the safeguard duty, hitting MSME exporters in particular, since it constitutes 60 percent of their production costs.

"Domestic prices will go up, which has already gone up due to the current difficult environment with the tariff wars going on, now with the safeguard duty, MSME exporters needed one more issue to worry about. If steel prices go up, it will be a huge hit on their production cost," the source added.

This at a time when MSMEs are already grappling with America’s steeper tariffs on steel and aluminium, which came into effect on March 12.

Pankaj Chadha, Chairman EEPC India had earlier said that India’s MSME exporters are worried owing to the 25 percent tariffs levied by US President Trump on countries that sells steel and aluminium to America.

"Total exports of $5 billion could be hit by the recent tariffs imposed by Donald Trump. Out of the total amount, iron and steel products comprise $3 billion, mainly covering MSME exporters. Since voyage time to the US is approximately 60 days, about $1 billion is on high seas, which will be affected by higher duties levied by America," Chadha said.

While bigger steel makers had been advocating a 25 percent safeguard duty on inbound steel shipments, expecting Trump’s tariffs to spur dumping into Indian market by countries such as China, a section of smaller players are against such a levy due to the fear of a rise in input costs.

The DGTR has recommended a much lower, 12 percent safeguard duty versus the initial proposal, to balance competing interests, industry sources said that current levy will still be a significant hit on MSME exporters.

"…12 percent safeguard duty is better than 25 percent, but then one can say 2 percent is better than 12 percent. The big players have been heard, while the MSMEs have been overlooked," the source added.

The Indian Steel Association (ISA), which represents leading steelmakers, such as Tata Steel and JSW Steel, have been lobbying for a safeguard duty on steel since December last year.