India wants to make sure that FTA incentives aren't utilized to dump steel

24 Jul 2023 , 11:34 AM

According to India’s steel secretary Nagendra Nath Sinha, who talked to ET, the country is relying on the inclusion of ‘melt and pour’ clauses in free trade agreements (FTAs) to safeguard its domestic steel industry.

This clause guarantees that any steel receiving tariff breaks under FTAs is produced exclusively in nations with agreements with India. It aids in preventing attempts to transit through FTA nations to dump steel into India coming from non-FTA nations like China.

We are negotiating ‘melt and pour’ as the product-specific rules of origin. According to Sinha, this clause guarantees that FTA benefits are exclusively available to legitimate firms abroad, not to those who re-route their products through India.

FTA negotiations are now being held with Canada, the European Union, and the United Kingdom. The India-Australia Economic Cooperation and Trade Agreement, which went into effect in December 2022, also has the ‘melt and pour’ clause.

Domestic steel producers have been wary of India’s trade agreements because they could let in a flood of inexpensive imports and undercut local suppliers. To continue to be lucrative, many businesses rely on trade barriers.

However, the conflict goes beyond the domestic sphere. The Carbon Border Adjustment Mechanism (CBAM) of Europe also poses a threat to dim the future for Indian steel producers. In response to a query on CBAM, Sinha remarked, ‘Indian exporters of carbon-efficient steel may not be affected. The government is looking at the rules that will serve as the foundation for a planned coordinated response.

In order to prevent carbon leakage in the EU when the bloc takes measures to uphold its climate goals, Sinha said it is a regulatory measure. In his words, ‘CBAM is currently only a reporting mechanism up to December 2025.’

According to the 2017 National Steel Policy (NSP), India intends to increase domestic steel production by 2030. Despite having an installed capacity of 161.3 mt, the nation’s crude steel production in 2023-23 was 126.26 million tonnes.

Sinha claims that as the economy expands, more demand would help to achieve the NSP targets. The objective to increase capacity from the current level of 161 million tonnes to 300 million tonnes of crude steel by 2030 appears attainable, he claimed.

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