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Can safeguard duty on imports make steel industry safe?

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Steel Authority of India Limited (SAIL) and JSW Steel are likely to benefit the most if the government decides to impose 20 per cent safeguard duty on imports of hot rolled steel products, led by higher realisation and lower costs, according to Steels-India, a report by Bank of America Merrill Lynch (BAML).

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BAML was responding to the recent recommendation by Director General (Safeguards) for imposition of safeguard duty on import of “hot rolled flat products of non alloy and other alloy steels in coils of a width of 600 mm or more for the next 200 days.”

The duty recommendation comes on the back of nearly 20 per cent decline in hot rolled coil (HRC) domestic prices, increased imports of steel led by China, Russia and Ukraine and an unforseen depreciation in Chinese yuan. This has further stressed the domestic steel industry which is already reeling under high leverage, the report said.

“The safeguard duty was imperative not only to protect the economic viability of the tier II unorganised steel mills but also to prevent rising non performing assets (NPAs) for the Indian banking sector which has an Rs 2.8 trillion exposure to Indian steel sectors. Out of this a significant Rs 1.95 trillion is with tier II mills,” the report added.

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