India Inc in a fix as Finance Ministry stonewalls pleas for anti-dumping duties

Even as Prime Minister Narendra Modi has initiated measures to boost the manufacturing sector through the ‘Make in India’ initiative, the Finance Ministry has stonewalled efforts by the Ministry of Commerce and Industry to provide protection to India Inc. from dumping of goods by rival producers in various countries like China.

A number of industries including chemicals, pharmaceuticals, steel, petrochemicals, tyre and paper have been affected due to non-imposition of anti-dumping duties, according to highly-placed government sources. As the result, Indian companies have lost business to overseas rivals, especially Chinese companies that are selling goods at prices below the fair value.

Department of Revenue blocks DGTR orders

The products that have been affected include cold-rolled steel products, wire rods, fibre board, uncoated paper, vitamin-C, ceftriaxone, dimethylformamide, glass fibre, low density polyethylene, melamine, styrene-butadiene rubber, and phenol. The levies put on hold by the Ministry of Finance include provisional anti-dumping duties and countervailing duties as well. The issue has been agitating India Inc. so much that it has gone all the way to the Supreme Court.

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The Department of Revenue (DoR), on its part, has simply said that the decisions of the Director General of Trade Remedies (DGTR) have not been accepted due to “public interest” – without attributing any specific reasons. Some aggrieved companies approached the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), pleading that the DoR cannot reject the recommendations of the DGTR without providing specific reasons.

After going through the pleas of the industry, CESTAT initially ordered that the recommendations of the DGTR should be implemented in the case of half-a-dozen products including acrylic fibre, methylene chloride, polyester yarn and choline chloride. However, instead of imposing the levies recommended by DGTR, the Revenue Department approached the Delhi High Court and sought stay on the decisions of the Tribunal.

The industry also approached Delhi High Court in the case of several products and has been running from pillar to post, crying that the revenue department was not imposing levies despite CESTAT and court rulings. Since last September, CESTAT has also directed the DoR to impose anti-dumping duties on caustic soda, fibre boards, aluminium ingots and caprolactam, but all such attempts have been stone-walled.

Why dumping defeats purpose of ‘Make in India’

In fact, the Ministry of Finance has modified rules to prevent any appeal against rejection of DGTR recommendations to impose anti-dumping duties. This has led to contrasting policies when it comes to boosting manufacturing industries.

One the one hand incentives are being provided through ‘Make in India’ initiatives to increase domestic production and exports, while on the other the Indian industry is not getting protection from unfair competition from overseas players, especially Chinese companies.

Dumping not only affects our companies in the domestic market, but also in export markets where subsidised products outprice Indian goods. That anti-dumping investigations are a quasi-judicial function and levies are recommended after detailed calculations as well as hearings has gone unheard since 2020 as the Department of Revenue has taken recourse to rejecting a large number of recommendations for such levies.

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Issue in Supreme Court

Recently, the issue reached the Supreme Court through a petition seeking anti-dumping duty on low density polyethylene (LDPE) as recommended by the DGTR. On April 13, the apex court ruled that provisional anti-dumping duty should be levied on LDPE, according to recommendations of the DGTR. The ruling was delivered by a bench comprising justices Krishna Murari and Sanjay Karol. The Revenue Department strongly opposed the ruling and got it suspended by the same bench in a swift move not normally seen in such cases.

Usually, the DoR implements all recommendations from the Ministry of Commerce & Industry on anti-dumping and countervailing duties. However, the trend has been turned on its head since 2020 when a large number of such recommendations have not been implemented, according to the sources.

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This has left India Inc concerned since rules have also been tweaked to prevent appeals, leaving little scope for taking grievances against foreign companies to the next stage. The Finance Ministry may have taken such a stand in order to keep the cost of imports for consumer industries low – as the products of one industry are often the raw material for another. Keeping the anti-dumping duties recommended by DGTR in abeyance without explaining any such rationale has left the affected industries high and dry.