Steel safeguard thresholds may distort prices, hurt MSMEs: GTRI | Mint

The government’s 12% safeguard duty on five categories of imported steel products is likely to create significant price distortions in the domestic market, according to a new report by the Global Trade Research Initiative (GTRI). 

The move, aimed at protecting domestic manufacturers from import surges, could end up hurting small businesses and raising steel prices, the report warned.

The safeguard duty, notified by the ministry of finance on 21 April, applies to imports falling below specific threshold prices across key steel products—hot-rolled coils ($675/mt), hot-rolled plates ($695/mt), cold-rolled coils ($824/mt), metallic-coated steel ($861/mt), and colour-coated coils ($964/mt). If imports are priced lower than these thresholds, a 12% duty is levied. 

The measure will be in effect for 200 days.

However, the GTRI analysis shows these thresholds are significantly higher than current international and even domestic prices, creating a de facto price floor. For instance, international prices for hot-rolled coils range between $444/mt and $455/mt, which is $220–$231/mt below the threshold.

Domestic prices, too, are lower at $585/mt–$632/mt. This mismatch is expected to halt most imports, compelling buyers to depend on local steel, potentially leading to further price hikes, the GTRI report said.

“This policy gives domestic producers a clear signal to raise prices closer to the threshold, and many have already begun to do so,” said Ajay Srivastava, co-founder of the GTRI. The trade think tank noted that steel prices have already increased 8–10% in anticipation of the duty.

The report warned that these developments could severely impact India’s MSME-driven downstream industries, which are already grappling with high input costs, monopolistic supply practices, and delays in supplier approvals.

MSMEs, particularly in the fabrication and engineering sectors, rely heavily on imported steel for specialized applications such as abrasion-resistant plates, which Indian mills do not produce in adequate volumes.

“The safeguard duty, combined with arbitrary quality control orders (QCOs), is creating artificial shortages and disproportionately hurting small manufacturers,” as per the report.

The GTRI also criticized the government’s approval process, alleging that the Directorate General of Trade Remedies (DGTR) recommended the duty without verifying injury claims by the steel industry. This comes despite domestic steel output growing by 19% and capacity utilization levels reaching 83–90%.

While the safeguard duty exempts most developing countries, China and Vietnam remain included. Several high-end steel categories—such as stainless steel, CRGO, CRNO, and tinplate—have also been excluded from the duty.

Industry observer says the move contradicts the government’s “Make in India” vision. “When local production is insufficient for several specialized steels, imports are not just necessary—they are vital. Instead, the policy appears to favour a few large players at the expense of thousands of smaller firms,” the report highlighted.