Centre Mulls Review of Import Barriers as MSMEs Protest Steel Protectionist Measures

In a growing debate on the impact of import restrictions on various sectors, the Indian government may review the protective barriers that currently benefit major domestic industries. These restrictions, including tariffs and non-tariff measures, have led to market concentration, pushing up costs for downstream users, particularly small and medium enterprises (MSMEs).

One prominent case is in the steel industry. After persistent lobbying by the Indian Steel Association (ISA), which represents large steel producers such as Jindal Steel, JSW Steel, and SAIL, the Ministry of Commerce initiated a safeguard duty investigation in December on certain steel imports. Protection for domestic steel producers has been in place since 2010, but a proposed 25% duty hike has drawn sharp criticism from MSMEs. The Engineering Export Promotion Council (EEPC) argued that domestic steel prices are significantly higher than imported steel, making it harder for smaller businesses to compete.

While larger companies argue that such protective measures are necessary to strengthen the domestic industry, MSMEs are concerned that they will face higher raw material costs. Pankaj Chadha, EEPC chairman, emphasized that a duty hike would disproportionately harm the downstream industry, which includes over 8 lakh MSMEs. These businesses, which rely on affordable raw materials, are not being included in the ongoing consultations, raising concerns over a lack of representation in the decision-making process.

The debate also touches on broader economic concerns. NITI Aayog Vice-Chairman Suman Bery warned that excessive trade barriers could lead to the creation of monopolies, ultimately harming India’s economic competitiveness. He argued that imports offer necessary competition, benefiting the economy more than protectionist policies.

In a broader context, the government had signaled its intention to review customs duty rates in its July 2024 Budget speech, aiming for simplification and to reduce trade-related disputes. As the Budget nears, there are growing calls from MSME bodies for a balanced approach that safeguards both large producers and the smaller players that are essential to India’s industrial landscape.