Steel imports should be kept out of Free Trade Agreement: Steel Ministry

In order to safeguard the interest of local steel firms, Steel Ministry has recommended new government to bring the imports from Japan and Korea with whom India has free trade pacts under negative list. Concerned over the growing steel imports, the Ministry has stated that under the Free Trade Agreement (FTA) with India and Japan/Korea, steel import has been rising at brisk pace due to progressively reducing import duty toward zero duty regime. India had signed FTA with Korea in 2009 and with Japan in 2011. India imported 5.445 million tonnes of steel in FY14. Though, the country has maintained its status as a net exporter of steel during the last fiscal. With FTA in place, Japan and Korea are enjoying duty benefits and their proportion in India's total steel import is on rise replacing traditional sources of Russia and the European Union. Further, since the economies of Japan and Korea are struggling with slowdown, these nations are exporting a lot of steel into India at a very low price, taking advantages of these FTAs. Rising steel exports from these nations has highlighted the need to exclude steel products under Chapter 72 of International Trade Centre (ITC) code from Indo-Korea and Indo-Japan Comprehensive Economic Partnership Agreement (CEPA) to ensure sustainability of domestic steel industry. India mainly imports flat steel products which find application in the automotive and fast-moving consumer durable sectors. India’s dependence on imports has also risen due to the sluggish domestic production. Over the past few years, domestic steel industry has been struggling with increased input cost, leading to decline in steel production. Further, low iron ore production, a main raw material for steel production, mainly in Karnataka has not only hampered the capacity utilization of various steel players, but also led to significant rise in the cost of iron ore in the domestic market due to limited supplies. At present, Indian steel production capacity stands at around 96 million tonnes. Meanwhile, domestic steel production is likely to improve as the government has lifted the iron ore mining ban in the main producing region Goa.