New Delhi, May 14 At a time when the country’s industrial growth has been distinctly on the downside with its worst performance in fiscal 2008-09, the Standing Board of Safeguard found it expedient to defer its final call for a couple of months on slapping safeguard duty on a range of industrial products, including HR Coils, auto components, acrylic fibre and paper products. This is refreshingly salutary, given the general bent of the authorities to fall in line with the demands of the apparently hard-hit domestic industry.
Import surge
The Board recommends the safeguard duty to the Revenue Department even as the Directorate-General of Safeguard does the preliminary probe to determine the causal link of import surge inflicting injury to indigenous industry.
The Commerce Secretary, Mr Gopal K. Pillai, who heads the Board, told Business Line here that the country has till now slapped safeguard duties only on some five products after ascertaining their import surge.
He said such safeguard actions would cover less than one per cent of the country’s aggregate imports. Trade policy analysts say that unless import surge actually supervenes of a particular product it would not be fair to use this weapon to deprive consumer of a cheaper and qualitative substitute from imports.
Even as the rules under safeguards provide for hearing from user industries and consumers, it is the complainant in the form of import-hit industry that gets its case sail through the preliminary probe.
Tyre dealers’ argument
Against this backdrop where industry is able to get the safeguard duty to render import dear, the All-India Tyre Dealers’ Federation (AITDF) has filed a submission to the Directorate-General of Safeguards, arguing that the reported move to impose special safeguard duty on passenger car radial tyres at the request of domestic tyre companies as anti-trade and anti-consumer.
The Federation Convenor, Mr S.P. Singh, trots out figures to state that the monthly average domestic passenger car tyre sales were Rs 300 crore a month in the first three quarters of fiscal 2008-09, against monthly import of Rs 29 crore only. This is because the replacement market for passenger radials has been growing due to 10-15 per cent annual growth in vehicle numbers in the last decade.
But the old passenger cars, with bad usage and maintenance practices, cry out for quick replacement of worn-out tyres with new ones. This generates high import demand as domestic industry does not have the quantity and even quality tyres to cope with such mounting demand. In this scenario, the Federation said that it is obliged to safeguard the consumers’ interests as it stands equidistant to tyre makers/tyre importers on one side and tyre users (car owners) on the other side.
The moot question raised by the Federation is that the Safeguard machinery should not rush to the rescue of the domestic manufacturers who might function as cartel to keep imports at bay and deprive the user industry/consumers from acquiring the subject goods at an assured quality and at competitive price.
Tyre pricing review
In fact, the Federation has said the entire tyre pricing for all categories of tyres and tubes i.e., trucks and buses (radial and non-radial), light commercial vehicles (LCV), passenger cars, sport utility vehicles/multi utility vehicles, mining/OTR tyres, two wheelers/three wheelers, tractors and animal driven vehicles (ADV) and industrial tyres should be subject to a fresh review.
This would help establish the inter-price impact on the profitability of each segment of tyre and tube for both radials and bias ply tyres, besides facilitating the causal link of the so-called surge in imports of a particular segment/size of tyre to the cost structure of domestic tyre company and how this is connected.
Trade analysts say that even as there is merit in providing stimulus measures to domestic industry hit by downturn, there should not be a free for all by any industry in lining up more safeguard measures on the alleged grounds of import surge hitting its very viability.
In the ultimate analysis, the user of the imported product — be an industry or an individual consumer — should not be left high and dry to the caprices of domestic industry cartel or oligopolies.
Source : Business Line