Government Weighs Options to Shield MSMEs from Steel Price Surge Amid Safeguard Duty Talks

The Indian government is mulling to protect micro, small, and medium enterprises (MSMEs) from a possible increase in steel prices if safeguard duties on imports become applicable. According to sources, talks are on amongst the Ministry of Steel, the Ministry of Commerce, and the Ministry of MSME to find a way out that ensures affordable rates without distorting the market. The safeguard duty proposed by the Steel Ministry in December 2024 seeks to check surging steel imports, which are said to be injuring domestic producers. The ministry proposed a 25% tariff on certain steel products, a plan backed by big steel producers. However, concerns have arisen that higher domestic steel prices could cripple MSMEs, many of which rely on affordable steel for their operations.

“There is a consensus within the government that MSMEs should have access to steel at international or export prices. However, implementing a foolproof mechanism is proving to be complex,” an official familiar with the discussions said. The primary concern is ensuring that MSMEs use the lower-priced steel for production rather than reselling it for profit. Since most MSMEs procure steel through intermediaries rather than directly from producers, preventing market diversion remains a key challenge.

The Directorate General of Trade Remedies (DGTR), which functions under the Commerce Ministry, began the probe in December 2022 after imports of ‘Non-Alloy and Alloy Steel Flat Products’ surged. The investigation was initiated after the Indian Steel Association complained that a surge in imports was causing serious damage to the domestic steel industry.

Industry players acknowledge the dilemma. While major steel producers are open to offering MSMEs steel at competitive international rates, they seek assurances that the material will not be diverted back into the local market. “We need a structured mechanism to ensure proper end-use,” a source noted.

A crucial meeting between the Steel, MSME, and Commerce Ministries is scheduled this week to address the issue. Meanwhile, Pankaj Chadha, Chairman of EEPC India, suggested that the council could assist in certifying genuine MSME manufacturers but admitted that preventing leakages entirely would be difficult.

Ultimately, the government and steel producers must formulate a workable plan to support MSMEs without undermining domestic steel pricing structures.