To provide relief to domestic producers, the Government has imposed safeguard duty on the import of seamless pipes and tubes, which are used in equipment for power generation, oil exploration, and bearing industry, besides others.
BHEL, ONGC and Oil India are among the largest consumers of such products, while Jindal Saw and ISMT Ltd are key domestic producers of these products. BHEL also produces these products to meet part of its requirement.
Decision to impose safeguard duty has been taken on the basis of petition filed by the domestic producers. Safeguard and anti-dumping duty are imposed in cases where there is a fear that excessive or cheap import will harm the domestic industry.
Safeguard duty is imposed on import from a group of countries, while anti-dumping duty is levied on import from one particular country.
(in tonnes)
Seamless pipes and tubes | 2011-12 | 2012-13 |
Domestic Capacity | 6,85,000 | 6,85,000 |
Domestic Production | 3,18,968 | 2,54,316 |
Demand | 6,89,406 | 5,84,098 |
Import | 4,25,194 | 3,73,848 |
According to a notification issued by the Central Board of Excise and Custom (CBEC), safeguard duty will be imposed at the rate of 20 per cent in the first year (August 13, 2014-August 12, 2015), 10 per cent in the second year (August 13, 2015-August 12, 2016) and at the rate of 5 per cent in the third year (August 13, 2016-February 12, 2017). This will not be applicable on imports from developing countries such as Indonesia, Malaysia, Thailand and South Africa, besides others.
The duty has been imposed after a detailed study by the Director-General (Safeguard) which pointed out that increased imports from China and other countries have caused adversely impacted the domestic producers.
There were also allegations that despite increase in the price of raw materials, importers were bringing their product at cheaper price, which was affecting the domestic industry.
Consumer’s perspective
According to the DG (Safeguard) final report, BHEL in its argument opposing the duty imposition, had said that its total requirement is 50-60 thousand tonne. Out of this, half of the requirement is met through captive production, while the remaining is procured from domestic and foreign companies on the basis of competitive bidding. The company’s average annual import bill is around ₹ 160 crore.
For, ONGC, the annual import bill for such products is little more than 2 per cent (based on the data of (2012-13 as mentioned in the annual report). Both ONGC and BHEL apprehended that imposition of safeguard will impact them financially.
The DG in its report did acknowledge this fact, but also said that a strong and robust domestic industry is also a requirement which can fulfil the needs of the domestic market and can grow in tandem and in competition to foreign suppliers.