India's MSMEs are facing a challenge due to the overwhelming influx of cheap Chinese goods. To counter this threat, experts and industry stakeholders are urging the government to introduce innovative investment and incentive schemes in the upcoming budget, specifically designed to empower and protect MSMEs. The steel industry, in particular, is facing a big crisis. India has transitioned into a net steel importer, with imports surging since March 2024. The flood of cheap Chinese steel has severely impacted smaller Indian mills, forcing them to reduce operations and consider layoffs, say experts.
On December 18, Union Minister of Heavy Industries, H D Kumaraswamy, in response to a Lok Sabha question, said steel imports from China rose by 80% to 16.1 lakh tonnes between January and July in 2024, against 9 lakh tonnes during the same period last year. The Minister also highlighted that imports have been increasing over the past three years. The imports of finished steel rose from 4.67 million tonnes in 2021-22 to 8.32 million tonnes in 2023-24, the official data showed.
In an effort to curb the influx of cheap steel, the government is considering imposing a temporary tax on steel imports from China. However, this move could have unintended consequences, potentially hurting MSMEs that rely on imports from China and Vietnam, experts say. Increasing taxes on steel imports could raise input costs by 10-20%, further exacerbating the challenges faced by MSMEs, they add.
Source Name : Economic Times
Former Steel Secretary Aruna Sharma suggests implementing a tax on imports, specifically a safeguard duty or anti-dumping duty, to protect India's steel market. This measure would temporarily counterbalance the surge in cheap steel imports, particularly from China, which has reached an all-time high. Sharma recommends extending this duty to Free Trade Agreement (FTA) countries if their imports disrupt India's market. This strategic move aims to level the playing field for domestic steel producer ..
The increased import duty imposed on MSMEs should be absorbed as a necessary measure, considering it was implemented after a thorough investigation by the Directorate General of Foreign Trade (DGFT), she adds. This duty aims to counter China's unfair trade practices, including dumping, which can have devastating consequences if left unchecked. To protect Indian businesses further, strictly enforcing non-tariff barriers is essential. This includes adhering to Bureau of Indian Standards (BIS) stan ..
“Manufacturing in India is efficient, but the high cost of power, logistics and credit rates makes it expensive. In the budget, if the government discounts the cost of power, logistics, then Indian prices can easily compete with dumping in China,” adds Sharma.
The experts also say that the government should consider alternative measures, such as providing financial assistance to MSMEs to help them absorb the increased costs, implementing policies to promote domestic steel production and reduce dependence on imports and offering incentives to MSMEs that invest in research and development, enabling them to improve their competitiveness and reduce their reliance on cheap imports.
Anubhav Kathuria, Managing Director, Synergy Steels, says that the influx of low-cost stainless-steel products, reported to have reached 1.19 million tonnes in 2024, has created significant challenges for India’s MSMEs. The Indian stainless steel MSMEs have contributed 1.2–1.4 million tonnes of capacity but face low utilisation rates and closures due to uncompetitive pricing. Imports from China, which have significantly surged by 548% since 2019, are priced lower, he adds.
“For instance, cold rolled stainless steel is priced at Rs 8,000–10,000 per tonne lower than domestic products despite a 7.5% import duty, exacerbating the struggles of domestic manufacturers. To address this, the upcoming budget can play a pivotal role by considering the implementation of the safeguard duty of 25% which is currently under review on specific imports, to create a level playing field for the MSMEs,” notes Kathuria.
The upcoming budget has the potential to open up new avenues for fresh investments and targeted incentives in favour of the MSMEs, he adds.
“Although initiatives like the newly introduced PLI 1.1 scheme for alloy steels like stainless steel is the direction to take, there are a few industry areas that need focus. Domestic stainless steel prices remain 25–30% higher than imported equivalents, mainly due to raw material cost (which is 70% of production cost). The government has already been ..
Industry experts anticipate 30% annual growth in infrastructure expenditure, which can further generate domestic demand for the industry. “Export competitiveness can also be boosted by targeted financial incentives and market access schemes. Such measures will be a boost to the MSMEs, making them competitive in the market and in the large-scale economic growth of India,” adds Kathuria.
Similarly, Panckaj N Umrania, Executive Director, KND Steel, anticipates continued support for industrial modernisation and favourable policies for the MSME sector. "Additionally, we look forward to increased funding for skill development and training programs to create a job-ready steel industry workforce. This initiative will improve labour productivity alongside adopting modernised manufacturing processes, which will be essential to enhance the global competitiveness of India's steel industry ..
Need for technological upgradation
However, Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), says the steel industry in India has blown the issue out of proportion to create an environment by which they could make imports impossible and rake in windfall profits.
“Not just now, the sector has perennially lobbied for more and more protection. You have to try hard to search for a year when they have not tried to make a case for higher import duties. But steel, along with copper, aluminium and polymers, are the building blocks of industrial economies. If they are not subjected to discipline of imports like all other producers in the MSME sector, India can forget to be a globally competitive manufacturing base. How can auto-component or cycle part manufactur ..