Since the government announced the suspension of CVDs in these two countries in the last budget (2021-22), India has seen a massive increase in imports, which has created uncertainty among existing players, harmed to the business and investment climate in the country, and forced many MSMEs to close shops en masse. Most of these smaller players have found themselves unable to compete with heavily subsidized stainless steel from China and Indonesia.
In recent months, MSME capacity utilization has fallen between 60% and 50%, due to dumped imports, with most of the underutilized capacity concentrated in the fragmented sector MSMEs, which contributes nearly a third of stainless steel production. steel capacity.
Such a drastic reduction in capacity utilization drove many producers out of business, leading to significant unemployment in this industry, and converted many manufacturers into traders. The various associations of relaminators have also pointed out that many of their members, who wanted to make new investments in terms of setting up new factories, have now suspended their investments due to the unfavorable circumstances.
If not corrected, the situation of MSMEs will deteriorate further. In December 2021, the European Commission imposed a CVD of 33.4% on stainless steel flat products from Indonesia, prompting Indonesia to dump more into India which, ironically, appears to be the only stainless steel producing country. stainless steel with no level playing field.
The MSME sector currently has nearly 70-80 melting units and over 500 units are engaged in rolling and employs over 400,000 direct and indirect workers. MSMEs have already invested around Rs 5,000 crore in plant and machinery and have invested another Rs 5,000 crore in working capital. With a total installed capacity of between 12.5 and 15 lakh tons per year for smelting, hot rolling and cold rolling, MSMEs operate with very thin margins and are therefore the most affected by the surge in imports.
In fact, the best period for the stainless steel industry was between October and March 2020-2021, when the capacity utilization of stainless steel players peaked at 90%, according to various stainless steel associations of MSMEs. CVD had been imposed on imports of Chinese stainless steel flat products on September 7, 2017, but they had resorted to dubious means to dump their goods into India via the Indonesian import route. But once CVD was imposed on Indonesia in October 2020, that path was also blocked, ensuring a level playing field for domestic players.
In a letter to the Minister of Finance, the All-India Stainless Steel Cold Rollers Association, one of the leading stainless steel production and supply organizations in India, clearly expressed their predicament. “As we recover from Covid, if CVD is not urgently imposed, our MSME members would not be able to hold on and close and become traders,” the letter explained.
The negative impact of subsidized imports of Chinese and Indonesian flat stainless steel products has been felt across the country by MSME players. Jodhpur, which produces nearly 25% of total output, Ahmedabad (25%), Bhiwadi (15%), Jagadhari (15%) and the National Capital Region (20%) all suffered the brunt of the losses. These actors produce inputs for utensils and other household applications. These players include both induction furnace players – those who melt steel and sometimes also produce hot-rolled flat products – and those who manufacture cold-rolled flat products.
Therefore, it is of the utmost importance for the government to withdraw the suspension of countervailing duties on China dated September 7, 2017. Second, accept the new final countervailing duty findings on Indonesia, as recommended by the DGTR on January 15, 2021, and impose anti-subsidy measures. duty on imports from Indonesia.
Since the stainless steel industry is the first target of imports, it needs significant help to create a level playing field. There is an urgent need to impose trade remedy measures in pending/completed cases where subsidized stainless steel has been proven to be dumped.
(The author is a professor and program head at Mahindra University)
