MSME Steel Players Raise Concerns Over Proposed 12% Safeguard Duty

A grouping of MSMEs (Micro, Small and Medium Enterprises) in the steel industry is readying a move to push the government to withdraw the suggested 12% safeguard duty on some steel imports. They worry that the measure intended to protect domestic producers could substantially increase production costs and harm exports.

The safeguard duty, which was prima facie recommended by the Directorate General of Trade Remedies (DGTR) on March 19, is likely to push domestic steel prices up by 8-10%, industry sources said. Since steel comprises around 60% of MSME production costs, such a hike could hit them badly in global markets.

“This duty will have a cascading effect on raw material costs, particularly for MSME exporters, and we will approach the government again,” said a representative of the industry, declining to be named.

If approved by the Finance Ministry, the proposed duty would remain in effect for 200 days. But MSME exporters say the additional costs come at a challenging time. They are already feeling the pressure of higher tariffs the United States imposed that took effect March 12.

Pankaj Chadha, Chairman of the Engineering Export Promotion Council (EEPC) India, said these global trade shifts are especially impacting MSME exporters. According to Chadha, “The 25% tariffs on steel and aluminium products by the U.S. may impact nearly $5 billion in exports, with $3 billion directly associated with iron and steel.” Shipments worth roughly a billion dollars, which are currently en route to the U.S., will now also face increased duties, he added.

While large steelmakers which are represented by the Indian Steel Association (ISA) have been pushing for a 25% safeguard duty amid fears that China could dump steel globally, MSMEs have claimed that even a 12% duty would be extremely burdensome.

“Big players have got a hearing while MSMEs fell through the cracks,” an industry source said adding that while relief was welcome, a balancing act needs to be done to find a solution for smaller businesses facing hurdles.