Any more protectionary measures for steel industry will impact ancillary industries: Economic Survey

Steel is used as an input in different industries and any further rise in steel prices will increase the cost of production of basic metal, non-metal products.

The Government of India has taken steps such as safeguard duty, anti-dumping duty and minimum import price to check surging steel imports, but further protection will impact downstream industries, the Economic Survey 2015-16 has said.

On account of an almost "stagnant" steel demand globally, particularly in China, major producers are pushing products into the Indian market, which is leading to a surge in steel imports, said the 2015-16 report card of the economy tabled by Finance Minister Arun Jaitley in Parliament on Friday.

The domestic steel industry, with higher borrowing and raw material costs and lower productivity, is at a comparative disadvantage. To check this, the government initiated several measures to curb surging imports and make domestic production sustainable, it added.

"Any further safeguards will impact downstream industries as steel is used as an input in different industries like basic metal and non-metal products, machinery, transport, construction and consumer goods," the Survey said.

It is estimated that for a 10% increase in steel prices due to a hike in anti-dumping or import duties, the cost of production of basic metal and non-metal products will increase by 5.4%, it added.

Besides, the cost of production in the construction sector will go up by 1.7%, machinery by 1.3%, transport by 0.7% and the consumer goods sector by 0.4%, it said.

During June-August period, the government raised basic customs duties on certain primary iron and steel products by up to 2.5%.

In June itself, anti-dumping duties were imposed, ranging from $180-316 (nearly Rs 12,369.6- 21,715.52) per tonne, for industrial grade stainless steel imported from China, Malaysia and South Korea.

Fourty countries had initiated anti-dumping measures including the US, EU, Brazil, Mexico and Argentina, and nine countries also imposed countervailing duties (CVDs).

In September, the government had clamped provisional safeguard duty on hot-rolled flat products of non-alloy and other alloy steel in coils at the rate of 20% ad-valorem for a period of 200 days, while it also reduced export duty on iron ore to 10% for select steel (grade less than 58% iron content).

Earlier this month, the minimum import price (MIP) was also imposed on 174 steel products for a period of six months.