India: Will Govt Renew FTA with Japan/Korea ? 

Apprehending unabated influx of steel from Japan and Korea, the steel ministry has urged its commerce counterpart to reconsider the two Comprehensive Economic Partnership Agreements (CEPAs) to safeguard the interest of the domestic industry even as a number of protective measures have improved their competitiveness in recent times.
 
Under the Indo-Korea CEPA agreement, signed in January 2010, India is committed to eliminate effective rate of customs duty on steel to nil by January 2017; while duty for imports from Japan have already been nullified with effect from April, 2016, as per the Indo-Japan CEPA agreement that came into force in February 2011.
 
Admitting the need to reconsider the two CEPAs in view of the current status of the steel industry, a source in the commerce ministry said that domestic firms should have geared for such a scenario and take advantage, but Indian firms do not have sufficient products to do reciprocal trade with Japan and Korea.
 
Prior to CEPAs, imports of steel from Japan and Korea were less compared with China and CIS countries, but post-CEPA, imports from Japan and Korea have surpassed imports from China. CEPAs are the catalyst. However, imports from Japan have registered higher increase as compared to imports from Korea post-CEPA.

Customs duty on steel import to India from Japan is 0.8% and that from Korea is 0.63%. However on the other hand, if an Indian importer imports steel from China or other countries, customs duty levied will be at the rate of 12.5%. Apart from this, safeguard duty & anti-dumping duty will be levied accordingly if the landed cost lies below the reference price or Non-Injurious price.
 
While Japan produced 105 MnT steel in 2015 and consumed about 63 MnT, it exported the remaining 40% of its production. Korea also exported 40% of its production last year. Together these two countries have around 70 MnT excess capacity which is dependent on exports. Japan and Korea now stand at second and third positions respectively among the top steel exporters in the world.
 
Meanwhile, Indian firms have expanded around 19 MnT capacity in the last two years to take the current installed capacity to around 120 MnT now. With consumption growth failed to pick up, capacity utilization has been on the wane since 2010-11. While it was 89.2% in 2010-11, it has now come down to below 80%, its worst in several years.
 
“Steel industry will face in great difficulty, if we don’t reconsider the agreement right now,” an industry official said.
 
Trend of total steel imports to India:

Fig in ‘000’ tonnes
Source: Commerce Ministry