Trade think tank advises caution as India proposes 25% duty on steel imports

India's steel industry needs to find a balance between the demands of large steel producers and the needs of smaller steel-dependent industries, GTRI says

India’s steel ministry has proposed a 25% safeguard duty on some steel items to control their imports, even as trade policy think tank Global Trade and Research Initiative (GTRI) advised caution, citing potential impact on industries reliant on these materials and international trade relations.

The government’s proposal came during a meeting between Union minister of steel H.D. Kumaraswamy and commerce and industry minister Piyush Goyal in New Delhi, the Press Trust of India reported, citing an official aware of the discussions.

Officials from both trade and steel ministries, as well as executives of top steel making companies including SAIL, Tata Steel, JSW Steel and AMNS India attended the meeting, the report said.

“Held a meeting with stakeholders from the steel and metallurgical coke industries along with my colleague & Minister of Heavy Industries and Steel @HD_Kumaraswamy ji,” Goyal said in a post on X (formerly Twitter).

“With both industries playing a vital role in India’s development journey, discussed ways to boost production, enhance quality, and further strengthen global competitiveness,” the minister said.

“We discussed ways for our ministries to collaborate and ensure ease of business for the steel and heavy industries, key sectors driving India’s growth,” Kumaraswamy posted on X.

“Strengthening the steel and heavy industries sector is critical for building a self-reliant India, and we will work tirelessly to create an enabling environment for its growth and global competitiveness,” he said, adding, “Together, we aim to foster innovation, boost domestic production, and enhance India’s position as a global manufacturing hub.”

With the annual budget just couple of months away, some domestic steel producers have been pushing the ministry for the hike.

GTRI advises caution

Meanwhile, policy think GTRI said in a report this week that India’s steel industry must strike a balance between the needs of large producers and small steel-using industries.

Current policies heavily favor large firms, stifling small and medium enterprises (SMEs) and threatening jobs and growth, GTRI said in the report.

“India’s large steel producers, despite claiming to suffer from imports, have flourished due to protective policies. Domestic stainless steel prices are 25-30% higher than comparable imported steel for certain thicknesses, even after accounting for duties,” the report said.

This price disparity, driven by import restrictions, significantly boosts the profit margins of large steel firms while SMEs bear the brunt, the report added.

GTRI suggested that to prevent under-invoicing, alleged dumping and tax losses, the steel ministry should introduce minimum import prices for specific steel items without creating excessive barriers for legitimate imports.

The think tank further said “monopolistic practices by large firms” should be investigated to ensure fair market access for SMEs.

Domestic steel production meets 94% of demand

Data analyzed by GTRI showed that in FY24, domestic production met 94% of India’s steel demand, with imports contributing just 6%. Over half of these imports were steel scrap (33.8%) and semi-finished steel (17.3%), both of which support domestic steel production. Such imports are made by large steel producers, it said.

The remaining 43.4% imports are of high-end flat-rolled steel products used in critical industries like automotive, construction, and household appliances.

India requires specific types of steel, such as stainless steel and cold-rolled grain-oriented (CRGO) steel, for its growing aerospace, automotive, and energy industries. However, these alloy steels make up only 7% of the country’s steel production. As a result, India had to import $4.5 billion worth of these essential steels in fiscal 2024, the report pointed out.

“Without sufficient imports, industries relying on stainless steel—ranging from construction to food packaging—risk production halts and escalating costs,” Ajay Srivastava, the founder and director of GTRI who authored the report, pointed out.

‘India needs simplified clearance’

Indian steel imports are struggling as numerous containers with imported steel remain stranded at Jawaharlal Nehru Port Trust and other ports due to complex clearance procedures by the ministry of steel (MOS).

The delays in customs clearance have disrupted production lines and damaged India’s global reputation, leading countries like Japan to formally request the government to release stranded shipments, GTRI said.

Srivastava noted that steel is crucial for India’s infrastructure and manufacturing growth, warning that the crisis could hinder gross domestic product growth and the country’s economic goals.

The report criticized the current import system, including quality control orders (QCO), steel import monitoring system (SIMS), and no objection certificate (NOC) requirements, as “overly complex and inefficient,” while stressing on the need to simplify import processes.

Srivastava called for a high-level review to streamline these processes for automatic and hassle-free compliance. He suggested simplifying the licensing for foreign manufacturers and exploring collaboration with international labs for quality control.

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