MSMEs: Centre may review import barriers that ‘protect’ big players

Between 2021 and 2023, the authorities brought successful prime power orders (QCOs) connected polyester and viscose fibres, cardinal inputs for synthetic textiles, efficaciously restricting imports. While the Confederation of Indian Textile Industry (CITI) continues to emblem precocious home costs and proviso shortages, large companies Grasim Industries and Reliance Industries benefit.

A emergence successful QCOs, tariffs, and different commercialized barriers connected cardinal earthy materials, that service to support the home manufacture from outer competition, is turning counterproductive – strengthening monopolies astatine the disbursal of smaller players. Now, MSMEs are pushing backmost against specified protectionist measures.

In a pre-Budget gathering with the Chief Economic Advisor and Finance Ministry officials, the Federation of Indian Micro and Small & Medium Enterprises (FISME) said the usage of tariff and non-tariff barriers similar QCOs connected the import of captious earthy materials specified arsenic steel, copper, aluminum, and polymers is creating an uncompetitive situation for Indian industries, peculiarly MSMEs.

Six months back, successful her Budget code successful July 2024, Finance Minister Nirmala Sitharaman had projected a broad reappraisal of customs work rates “to rationalise and simplify it for easiness of trade, removal of work inversion and simplification of disputes”. The authorities whitethorn instrumentality steps to rationalise customs work rates further successful the Budget to beryllium announced connected Saturday.

Not lone bodies representing MSMEs, determination is immoderate pushback from wrong the authorities too. NITI Aayog Vice-Chairman Suman Bery cautioned against precocious tariffs and commercialized barriers astatine a property briefing successful December, and said the authorities has to beryllium “very careful” to not adjacent disconnected imports to the constituent wherever India starts “cultivating section monopolies”. “An system frankly gains much from its imports than it gains from the exports due to the fact that imports are what supply competition,” helium said.

The Indian Express studied aggregate cases wherever import restrictions – tariff and non-tariff – person led to marketplace attraction and accrued costs for downstream users crossed sectors, from metals and textiles to chemicals and energy.

Steel

The Indian Steel Association (ISA) persuaded the Directorate General of Trade Remedies (DGTR) nether the Ministry of Commerce and Industry to initiate a safeguard probe connected December 19 into the import of definite alloy items. The ISA’s members see large players specified arsenic Jindal Steel and Power Ltd, JSW Steel Ltd, and state-owned SAIL Ltd.

In 2024, home terms of hot-rolled coils, a benchmark for level alloy products, was astir Rs 48,350 per tonne. In contrast, alloy imported from China was disposable astatine Rs 46,870 per tonne.

“MSMEs are not being invited to the ongoing consultations. A work hike volition wounded the downstream industry. If extortion is provided for alloy producers, determination indispensable beryllium extortion for MSMEs too. You cannot person a concern wherever producers are safeguarded, but 8 lakh MSMEs are near without support,” said Pankaj Chadha, EEPC chairman, successful December.

A authorities authoritative said determination is merit successful the safeguard work petition arsenic globally determination is simply a propulsion backmost against Chinese steel. “European Union has been blocking imports for the past 8 years, the US has imposed restrictions. So determination is simply a lawsuit of commercialized diversion. The probe volition instrumentality into relationship the presumption of MSMEs. They are yet to taxable the same,” the authoritative said.

Arvind Panagariya, Chairman of the 16th Finance Commission, said: “There is small uncertainty that these [safeguard duty] policies springiness a fillip to our alloy industry. But they besides rise the terms of steel, which undermines the gait of enlargement of railways and hurts the consumers of products utilizing steel, specified arsenic room utensils, cutlery, refrigerators, bicycles, motorcycles, workplace machinery, and automobiles. The higher costs besides pb to occupation losses successful these products.”

The ISA and the alloy companies did not respond to requests for comment.

Chemicals

Between 2021-22 and 2023-24, DGTR, India’s apex commercialized watchdog, recommended an anti-dumping work successful the last findings of 92 anti-dumping investigations. The Central Board of Indirect Taxes and Customs (CBIC) nether the Finance Ministry accepted DGTR’s proposal successful precisely fractional the cases, of which 37 per cent covered goods manufactured by either a sole home shaper oregon conscionable 2 producers.

Most of these targeted chemic goods and were initiated by “sole producers” similar Laxmi Organics Industries Ltd, Sudarshan Chemical Industries Ltd, Cabot Sanmar Ltd, Arch Pharmalabs Ltd, Gujarat Narmada Valley Fertilisers & Chemicals Ltd (GNFC Ltd), and Vinati Organics Ltd, according to an investigation of DGTR documents by The Indian Express.

GNFC Ltd, sole shaper of toluene di-isocyanate (TDI) successful India, told this insubstantial that its “capacity is capable to cater to the bulk of home TDI demand” and that “unabated dumping of TDI successful India is grievously injuring the home industry.”

In immoderate instances, CBIC did not judge DGTR’s proposal successful anti-dumping cases initiated by sole producers. The interaction of anti-dumping duties connected downstream users, who payment from inexpensive imports of earthy materials, is simply a large information successful the Finance Ministry’s determination to judge oregon cull a proposal by DGTR, sources said.

Textiles

Less than a period aft an anti-dumping work connected VSF was removed by the Finance Ministry successful August 2021, Grasim representatives pushed the Ministry of Commerce and Industry to modulate the import of VSF done prime norms.

In April 2023, CBIC started implementing the QCO, allowing VSF imports into India from lone those producers approved by the Bureau of Indian Standards (BIS). Notably, astir of India’s VSF imports came from Indonesia, portion nary Indonesian shaper has been certified by BIS till now. After the QCO came into effect, Grasim’s marketplace stock jumped from 90 per cent to 95 per cent, portion downstream idiosyncratic associations appealed to the Textile Ministry to temporarily suspend the QCO.

Currently, determination is simply a QCO connected polyester staple fibre (PSF) arsenic well, which is besides a man-made fibre similar VSF. Compared to VSF, the PSF marketplace is comparatively much fragmented but inactive concentrated.

As per documents from DGTR, Reliance Industries Limited (RIL) accounted for 57 per cent of home PSF accumulation successful 2017. The remaining marketplace stock belonged to Alok Industries Ltd, owned by RIL, Indo Rama Synthetics (India) Ltd, and The Bombay Dyeing & Mfg Co Ltd. Industry players assertion that RIL continues to clasp a marketplace stock of astir 60 per cent.

Downstream synthetic textile manufacturers person urged the authorities to revoke the QCOs connected man-made fibres (MMF).

“Indian home earthy worldly prices are importantly higher than planetary prices. While competitors similar Bangladesh, and Vietnam person escaped entree to specified earthy materials, India has imposed QCO connected MMF fibre/yarn which is acting arsenic a Non-Tariff Barrier connected the imports of specified earthy materials and frankincense affecting their escaped flow. It has resulted successful a shortage of immoderate specialized fibre/yarn varieties,” the Confederation of Indian Textile Industry (CITI) said successful its latest pre-budget memorandum.

Solar

The Ministry of New and Renewable Energy reimposed its mandate requiring star projects to root modules exclusively from a government-approved database of home manufacturers starting April 1, 2024. The determination was taken contempt erstwhile Union Minister R K Singh and the cardinal nationalist assemblage endeavor SJVN Ltd explicitly flagging concerns astir home manufacturers engaging successful “excessive profiteering” and warned of higher tariffs for aboriginal projects fuelled by much costly home modules, according to documents accessed by The Indian Express nether the RTI Act.

The terms spread betwixt home and imported modules, chiefly from China, has widened importantly successful caller years. Compared to 6% successful the archetypal 4th (Q1) of FY22, home modules turned 50% much costly successful Q1 FY24, earlier astir doubling successful Q1 FY25, according to an investigation of CRISIL data.

Companies linked to 5 manufacturers — Waaree Energies, Adani Solar, Nasdaq-listed ReNew Power, US-based First Solar, and Tata Power — power astir fractional of the existent capableness listed connected the Approved List of Models and Manufacturers (ALMM), archetypal issued by the ministry successful March 2021.

Copper

More recently, a QCO connected the import of refined copper, effectual December 1, threatened large proviso disruptions, arsenic 7 Japanese producers, who proviso 30 per cent of India’s copper, were yet to person BIS certification. Downstream idiosyncratic associations told the Ministry of Mines that a 90-day shortage had been created owed to the QCO and person sought to propulsion the implementation day by 4 months. Without Japanese imports, downstream users basal to suffer entree to astir 1 lakh tonne of refined copper implicit 3 months.

In India, determination are lone 3 large producers of refined copper, namely Adani’s Kutch Copper Ltd, Hindalco Ltd, and Vedanta Ltd. On December 8, 2 days aft The Indian Express report, 1 Japanese shaper received the BIS certification to export to India, followed by different shaper days later, arsenic per the BIS website. However, downstream users asseverate that exports from Japan are yet to resume owed to compliance-related hurdles.