NEW DELHI (Commodity Online): Steelmakers in India have urged the government not to bring the commodity under the purview of the recently signed free-trade agreements with Asean and Korea.

Steel Authority of India (SAIL), Essar and Ispat, which are troubled by cheap imports from Thailand and Korea, urged the government that FTAs will increase the flow of low-cost steel from these countries and discourage investments in the sector in the long term.

Although imports declined marginally during the first quarter of the fiscal year, it moved up 3.5% to 5.8 lakh tonne in July 2009 compared with 5.6 lakh tonne in the same month last year.

The domestic steel industry has been pressing for the levy of safeguard duties on import of hot-rolled coils (HRCs) for some time now as the product was entering India at very low prices. HRC is a key input in cold-rolled steel and is used primarily for construction.

Countries such as South Korea, Russia, France, Thailand and Ukraine are exporting HRCs into India at low cost as they are facing surplus situation and will continue to do so till demand for the product returns. FTAs with South Korea and Asean will further aggravate the situation.

Steel imports attract 5% import duty now, which will be removed within five years of the FTA being ratified, but the terminating schedule differs from product to product.

Since cost of producing steel is higher in the country compared with other major steel-producing nations, it will become difficult to match domestic prices with international prices. Once tariff barriers are relaxed, dependency on imports will go up and fresh investments in the sector will dry up.

India is among the few emerging economies that are seeing a revival in demand. This is the reason why steel companies from other countries are pushing their products into India.