Why Indian Steel Producers are Opposing RCEP
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.Oppressed from the government’s efforts in inching close to sign the RCEP pact, Steel industry tycoons have expressed their serious concern over the increased foreign involvement and free import duty. As the pact will open doors for the duty-free imports from foreign traders, Steel industry seems perturbed.
The RCEP is a proposed Free Trade Agreement between the member states of the Association of Southeast Asian Nations (ASEAN) Japan, China, South Korea, India, Australia and New Zealand. The Negotiations for marking RCEP was officially brought up in November 2012 at the ASEAN Summit in Cambodia and is currently in the advanced phase of conclusion.
As compared to other countries’ Steel production, Steel creation cost in India is higher by about $40 a ton. The reason behind the hiked production cost is creaky infrastructure, increased taxes and exorbitant capital cost. Before opening up the doors for the global companies, domestic players have asked government to provide an export incentive of $40/ton to them in order to bring both global and domestic producers on the same platform. According to the steel producers, signing RCEP would bring ease in imports for foreign speculators but simultaneously nation's steel producers will suffer the decline in sales and business.
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In 2019, steel export dropped by 7.5 per cent in the first five months of this fiscal year. As compare to the last year, steel exports in August surged to 37 per cent in 2019. This resulted post the companies’ efforts to overcome economy slump in the nation. Despite slowdown, import duty grew by 27 per cent in August in 2019. But the most worrying factor for the domestic steel players is the jump in the duty free imports share from FTA countries such as Japan and Korea.
Considering the overall import percentage of FTA countries, the percentage of imports jumped to 77 per cent in August as compare to the whole year i.e. 58 per cent.
Showing his concern over the declining production percent, JMD, JSW Steel told business line, that steel industry is already suffering through FTA, and the new RCEP pact will include Australia, China and New Zealand which will make it more inconvenient for the domestic producers to excel in business.
Several steel producers have not been in favor of RCEP due to the free import duty to the countries, According to them, India is a big capable market and countries should come and invest here. Signing Regional Comprehensive Economic Partnership has brought the economy stress amongst the experts and speculators are seeking solution to the declining figures.