South Korea has asked India to remove restrictions on steel supplies from that country and widen the scope of a free trade agreement (FTA) between the two sides, sources said.
“They (South Korea) say that they mainly supply certain specialised steel products, which are not produced in India in a major way. Hence, such supplies won’t hurt Indian steel producers,” an official source told FE. Both countries are reviewing their FTA, formally called Comprehensive Economic Partnership Agreement, to further boost bilateral trade. South Korea, the second-largest supplier, accounted for almost 24% of India’s finished steel imports in the first quarter of 2016-17.
To protect domestic primary steel producers from dumping from overseas, India has taken a raft of measures since last financial year, including the imposition of basic customs duty, safeguard duty, anti-dumping duty and a minimum import price. While the imports from main exporter China have been reduced, these measures have also hurt supplies from South Korea.
Annual growth in India’s iron and steel imports from South Korea slowed in the last financial year to just 3% (to $1.9 billion) from as much as 29% in the previous year. In the first half of this financial year, such imports crashed to just $0.7 billion, showed the official data. In volume terms, India’s steel imports dropped around 40% in the April-November period, while production rose 8.8%, showed the official data. South Korea mainly exports hot-rolled and cold-rolled flat steel products to India.
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However, the domestic steel industry refutes South Korea’s claim. “Today, we can produce in India as much as 90% of the kind of steel that South Korea supplies to this country. Maybe, there was a time, some 10-15 years ago, when India was not producing such steel in a big way. But these days, our producers have new and state-of-the-art technology, new product lines etc,” said Sanak Mishra, general-secretary and executive head of the Indian Steel Association.
For its part, India is asking Korea to offer greater market access for farm items, which Korea is reluctant to offer, said the official. India’s exports to South Korea dropped 23% in the last financial year to $3.54 billion, while imports fell just 3.6% to $13.04 billion in 2015-16 from a year before.
Earlier this year, Hyunghwan Joo, South Korea’s minister for trade, industry and energy, said both the sides need to further strengthen their institutional foundations of trade and investments by upgrading the CEPA. He said the current CEPA suffers because of a “low utilisation rate due to complex rules of origin and low level of concessions” and that CEPA is benefiting only 62% of Korean exports to India. South Korea is seeking a widening of the scope of CEPA by including more products, including steel products and machinery.
Indian steel producers, however, have been demanding that steel products be kept out of the FTA with Japan and Korea, jittery as they are of these countries flooding the domestic market with cheaper steel products by cashing in on concessional duty rates.
