Small-Scale Steel Exporters to Seek Government Relief
A section of Micro, Small, and Medium Enterprises (MSMEs) in the steel sector is preparing to urge the central government to reconsider the proposed 12% provisional safeguard duty on certain steel products, fearing a sharp rise in domestic prices.
Industry insiders believe that if implemented, the safeguard duty could lead to an 8-10% increase in domestic steel prices, significantly affecting MSME exporters who rely heavily on steel as their primary raw material. With steel accounting for nearly 60% of MSME production costs, any price surge could erode their competitiveness in both domestic and international markets.
Government’s Proposal: 12% Safeguard Duty for 200 Days
On March 19, 2024, the Directorate General of Trade Remedies (DGTR)—the Commerce Ministry’s investigative arm—recommended imposing a 12% provisional safeguard duty on certain imported steel products for 200 days.
The proposal aims to protect domestic steel producers from a potential surge in low-cost imports.
However, the final decision rests with the Finance Ministry, which must approve the levy before implementation.
If imposed, the safeguard duty would immediately raise the cost of steel for industries dependent on imports, including MSMEs.
Impact on MSME Exporters: Rising Costs and Tariff Challenges
Industry representatives warn that the safeguard duty could cripple MSME exporters, many of whom are already struggling with tariff barriers in key international markets.
Domestic steel prices are already high due to ongoing global trade tensions and rising raw material costs.
The additional 12% safeguard duty could make Indian steel-based products more expensive, reducing their competitiveness in global markets.
The United States recently imposed higher tariffs on steel and aluminum, further straining Indian MSME exporters.
According to Pankaj Chadha, Chairman of EEPC India, MSME exporters are deeply concerned about the 25% tariffs imposed by the U.S. on steel and aluminum products.
India’s total steel and iron exports to the U.S. amount to $3 billion, out of a total $5 billion in metal exports.
With the U.S. imposing higher duties, many Indian MSMEs are already facing reduced demand and lower profit margins.
Nearly $1 billion worth of steel-based exports currently in transit to the U.S. may be impacted by the new American tariffs.
Balancing Interests: Large Steelmakers vs. MSMEs
While large Indian steel manufacturers have long advocated for a safeguard duty on imported steel, MSMEs fear the move will backfire by raising their raw material costs.
Major steel producers, represented by the Indian Steel Association (ISA), have been lobbying for a 25% safeguard duty since December 2023.
Their argument is that countries like China could increase steel dumping in India, especially after the U.S. raised tariffs on Chinese steel imports.
However, MSME steel manufacturers argue that the current 12% safeguard duty is still too high, despite being lower than the initial 25% proposal.
An industry representative, speaking on condition of anonymity, stated:
“A 12% duty is better than 25%, but for MSMEs, even a small increase in steel prices can have severe consequences. The interests of big steel players have been considered, but MSMEs are being overlooked.”
MSMEs to Approach the Government Again
MSME industry bodies plan to submit a formal representation to the government, urging them to reconsider the safeguard duty.
This is not the first time MSMEs have raised concerns.
Industry players had previously written to the government regarding steel price hikes, and they plan to do so again in light of the latest developments.
The Finance Ministry will have to weigh the interests of both large steel manufacturers and small-scale producers before making a final decision.
With global trade conditions becoming increasingly volatile, and India aiming to strengthen its domestic manufacturing sector, the government’s decision on the 12% safeguard duty will be closely watched by steel producers, exporters, and industry analysts.
