February 23, 2020
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Chinese Coke, Anyone?

Foreign manufacturers are selling at low prices in many sectors—jeopardising domestic industry

Chinese Coke, Anyone?
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ARE foreign manufacturers, aided and abetted by their governments, selling their products in India at ridiculously low prices, just to ensure that Indian companies are wiped out? This is what scores of domestic manufacturers are alleging. As many as 41 industries have filed petitions to this effect with the Commerce Ministry over the past couple of years. The government, they say, must move quickly to stop this "dumping". Otherwise, it could be curtains for several Indian industries.

Commerce Minister Ramakrishna Hegde has already announced that he will set up a directorate to investigate dumping.

The logic of dumping works thus. Governments subsidise exports so exporters can sell their products at a cheaper price internationally. But sometimes, the subsidies are so high that the exporter can sell at lower than manufacturing cost, thus getting an unfair competitive advantage over others. Indian industries say that a great deal of our imports are coming in at these absurd prices, making the imported product cheaper than the domestic one. Domestic industries will die, and then these foreign companies will have a monopoly over the Indian market. At which point they can charge exorbitant prices from the helpless customer. Most governments tackle dumping by slapping anti-dumping duties on the imports so that they match prices offered by domestic manufacturers.

For instance, the Industries and Commerce Association (ICA) is demanding an anti-dumping duty on coking coal from China. Metallurgical coke used in the manufacture of pig iron is being dumped in India by China at a rate of $88 per tonne (at an import duty of 15 per cent). Coke from BHP Australia is being quoted at $92 to $94 per tonne. The landed cost of Chinese coke works out to around Rs 4,200 per tonne while the domestic coke supplied by Bharat Coking Coal and Durgapur Projects is quoted at a price of Rs 3,000 per tonne. However, the freight costs to other parts of the country hikes the domestic price upwards of Rs 4,200 per tonne. Says Anup Agarwal, managing director of BLA Industries: "India has enough reserves of coking coal to meet domestic requirements for the next 200 years. It will be suicidal for the national economy to completely close down coking coal and coke production due to unfair trade practices followed by China's coke producers."

 On March 20, the Commerce Ministry issued a notification concluding that "metallurgical coke originated in or exported from China has been exported to India below normal value, resulting in dumping; that Indian industry has suffered material injury and that the injury has been caused cumulatively by the imports from the subject country." The ministry has recommended an anti-dumping duty of Rs 1,800 per tonne.

But coking coal customers do not want this duty to be imposed. Coke users in the pig iron and soda ash industries have threatened to go to court against the duty. They claim that Indian coke has a high ash content while in the Chinese coke, ash content is quite low and suitable for the pig iron industry. "Besides," says a Pig Iron Manufacturers Association (PIMA) member: "The minimum export price of Chinese coke is within 10 per cent of the domestic price and thus not liable for anti-dumping duty." The Commerce Ministry has now sought a response from aggrieved parties before the end of May.

Last September, the Finance Ministry turned down the Commerce Ministry's proposal to impose an anti-dumping duty on cheap PTA imports from South Korea,Thailand and Indonesia. The currency devaluation in those countries has made several commodities cheap enough to compete with Indian manufacturers. Last year,Herdillia Unimers, part of the Duncan Goenka group, filed another petition with the Commerce Ministry to impose anti-dumping duties on EPDM (ethylene propylene diene monomer) rubber from Japanese and Korean companies. Herdillia Unimers is the only producer of EPDM rubber in India and the alleged dumping had forced the company to halve its production. Bisphenol and epoxy resin manufacturers have also expressed their ire over the dumping they say is going on from Japan, Brazil, Russia, US, Korea and Taiwan.

The Commerce Ministry has also initiated anti-dumping investigations on acrylic fibre imports originating from Japan, Portugal, Spain and Italy. According to the ministry's notification, there is prima facie evidence that imports of acrylic fibre from the accused countries are causing material injury to domestic industry. It has also recommended anti-dumping duties on magnesium originating or exported from China. Early this year, the Finance Ministry imposed anti-dumping duties on five categories of catalysts originating or exported from Denmark.

 Domestic manufacturers are also up in arms against the low import duties that many of the imports attract. Says one affected industrialist: "It's more like us asking the government to correct Chidambaram's mistakes."

Topping the list is the demand by the Indian Sugar Mills Association (ISMA) to impose a 40 per cent customs duty on imported sugar. Says Shishir Bajaj, ISMA president and Bajaj Hindustan CEO: "The Mahajan Committee's recommendation to decontrol sugar prices should be accompanied with an imposition of 20 per cent customs duty and 20 per cent  countervailing duty on imported sugar."

 India is the largest producer of sugar in the world with a likely production of 12.1 million tonnes this year, which means work for 40 million farmers in the country. The Rs 15,000-crore turnover industry is in the dumps, thanks to free imports from countries like China, Pakistan and some CIS countries. "Sugar imports at zero duty are causing havoc.

 India is the only country in the world with zero duty on sugar. Countries like Sri Lanka, Thailand, South Africa, Colombia, the Philippines and Bangladesh have levied import duties ranging from 66 per cent to 200 per cent," says Bajaj. Sugar imports in India do not even have the special customs surcharge of 5 per cent applicable to all commodities imported into the country.

Even the US has imposed a duty of 130 per cent on imported sugar. Under the World Trade Organisation (WTO) terms, India can impose a duty up to 150 per cent. According to ISMA, India does not need any imported sugar when it is carrying a stock of 10.1 million tonnes as on March 15, 1998. But private trading companies including multinationals have registered the import of 6.5 lakh tonnes of sugar out of which 4 lakh tonnes have already landed in the country. "Unless the government wakes up, India would be having an imported sugar surplus of almost 10 lakh tonnes," warns Bajaj.

The domestic sugar industry has to supply 40 per cent of its production as levy sugar to the government much below the cost of production. By December, the industry's total stock of free sugar is estimated to go up to 2.3 million tonnes while the levy shortfall of sugar would be 1.3 million tonnes. So, even if the levy sugar shortfall is made good from the free sugar, India would have 1 million tonnes of surplus sugar for free sale. "It makes absolutely no sense for the government to allow imports when the domestic situation is more than comfortable," says Bajaj.

BAJAJ says the European Union, which is the principal exporter of white sugar, sells it at about $800 per tonne in its domestic market and dumps it into the Indian market at around $310 per tonne. Several multinational sugar trading houses—Glencore, Cargill and so on—have established outfits in India. Warns the ISMA president: "We would like to caution the government that a repeat of 1994-95 should not re-occur when 2 million tonnes sugar were imported in the country which ultimately created havoc in the Indian sugar industry."

The fact that anti-dumping duties are resorted to by almost every nation lends credence to domestic industry's demands. Indonesian authorities have slapped anti-dumping duties on exports of hot rolled coil and plates by Tisco and Essar Steel. Thailand is also scrutinising dumping allegations against India, Kazakhstan, Bulgaria, China, Russia and Ukraine. The European Commission has imposed definitive anti-dumping duties on imports of unbleached cotton products.

As the clamour for anti-dumping duties grows in strength, the government may soon find itself between the devil and the deep sea. On the one hand, domestic industries are crying hoarse to incite the swadeshi sentiments of the present government. On the other, the US Trade representative has asserted that the US government will not tolerate India's balance of payment excuse for imposing import duties. The European Union has also objected to the various subsidies available to Indian exporters in terms of duty drawbacks and passbook schemes.

Thus, dumping is turning into a curious case where the government has to move both forcefully and with care.

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