After having ensured the highest slab of import duty on steel
and having got the Non- Tariff Barriers imposed on its imports,
the Indian steel manufacturers formed a cartel to increase
prices arbitrarily. The price differentials between International
and Domestic steel has been running at its highest level during
the last 12~15 months period. A large number of user SMEs
have become un-competitive because of higher duty on steel
with virtual ban on import though the duties on their finished
products remain same or lower than steel.
The Union Ministry of Steel has been used
by steel majors to further their own narrow agenda of protectionism.
It is rather unfortunate the way the Ministry unabashedly
proclaims as to how they have thwarted imports of steel on
its web site.
FISME's initiative:
To address the issue, FISME along with partner SME associations
organized a meeting in New Delhi on 18th Oct 2003 to formulate
a joint strategy. The Meeting was chaired by Mr. Dinesh Singhal,
President FISME and the key Speaker had been Mr. Arun Goel,
Intl. Trade Expert and Columnist (Export-Import Notes, the
Economic Times)
Besides FISME constituents, the inputs
were received from the following associations :
- Karnatka Small Scale Industries Association, Bangalore,
Karnatka
- Indian Industries Association, Lucknow, UP
- All India Industries Association, Mumbai, Maharashtra
- Builder Association of India, Mumbai, Maharashtra
- Rajkot Engineering Association, Rajkot, Gujarat
- Faridabad Small Industries Association, Faridabad, Haryana
- Mayapuri Industrial Welfare Association, Mayapuri, Delhi
- Association of UPS & Power Conditioning Manufacturers,
Delhi
Salient features of Joint Strategy agreed:
i. Pressure should be mounted to eliminate the Non-Tariff
Barriers from steel i.e. removal of condition of mandatory
BIS approval/ registration.
ii. Demanding single rate of duty e.g. 8% on all products
to address the problems arising of lobbying from raw material
manufacturers
iii. Sensitization of associations and SMEs so that they appreciate
the dangers of inverted tariff structure
Rationale :
i. Removal of Non-Tariff Barrier from Steel import has become
priority because it restricts/ thwarts imports and provides
the incentive for domestic large companies to form cartels
and to enter into collusive pricing. Although, it may not
provide the immediate relief as currently the international
prices are firmed up, yet the removal would force the steel
majors to refrain from arbitrary price hikes.
ii. Ideally the tariff should be graded from raw material
to finished goods; low for the former and high for the latter.
But the questions as to what constitutes raw material and
what finished goods being always debatable, usually in our
set up, the mighty and the powerful lobbies end up getting
the highest protection. India's tariff structure is hugely
inverted is an open secret. Small Industries can never match
the resources to fight this continuous exercise. The best
bet for them is single rate of duty. A solution supported
by such eminent economists as Dr. Arvind Panigrihya and Dr.
Kelkar.
iii. Most small industries believe the Government that duty
protection for SSI products is on higher level of 25%. This
protection is but on paper. The duty on their raw material
being at highest (on Steel, Copper, Al and plastic raw material);
the effective rate of protection for SSIs is very low. Associations
and the SMEs ought to recognize the dangers of inverted tariff.
Impact
There is increased questioning of policy of providing undue
protection to steel sector in Govt. as well as in Media. More
and more associations have joined in to support the rationalization
of tariff and liberalization of steel sector. Some of recent
development due to this increased pressure has been :
· Non- Tariff Barrier from Steel
imports has since been removed on 28th Oct 2003
· The Secretary Steel has since been transferred. |
