By Ishita Mishra
The chemical industry in India is the sixth largest chemical industry in the world. However, India is a net importer of chemicals with imports totalling to $19 billion and exports totalling to $12.7 billion as per fiscal year 2015. The deficit of imports in comparison to exports can be attributed to the dumping of chemicals in India. In order to boost domestic industries, the government plans to impose an anti- dumping duty on imports of sodium nitrite from China amounting to $72.95 per tonne.
Anti-dumping duty and its effects
Post liberalisation, India had to remove the high tariff and non-tariff barriers it had put in place to protect the domestic industries. This resulted in fierce competition from foreign industries along with cases of dumping. Dumping refers to when import of a good from a country takes place at a price that is lower than the price charged in the domestic market of the country that is importing the good. Dumping usually involves high volume of imports and hence, affects the financial viability of domestic producers. To protect domestic manufacturers from dumping, a domestic government imposes a tariff called anti-dumping duty on imports that are believed to be priced below fair market value.
Anti- dumping measures are not used as a tool to restrict trade but to provide the domestic industries with equal opportunities and promote fair trade. Imposition of anti- dumping duties has a direct impact on the volume and value of the good that is imported. Due to the rise in prices of the imported good, the value of the good decreases along with the volume imported. As levying the duty equalises the prices, the domestic industries are greatly benefited. However, they benefit at the expense of consumers as they experience a hike in prices and developing countries and small and medium enterprises as they suffer significant loss of exports.
Rising price of met coke
Imposition of anti- dumping duties on a particular good not only affects the industries that make the good, but also the industries that use that good as a raw material. This was why when the domestic metallurgical coke (met coke) industry asked the Directorate General of Anti-Dumping and Allied Duties (DGAD) to impose anti-dumping duties, the domestic steel makers took a stand against it. Met coke is an important raw material used to make steel and constitutes 40-50% of the total cost of crude steel. However, the price of met coke has tripled since the initiation of the case and will further increase if anti- dumping duties are levied. The increase in price of met coke will, in turn, increase the price of finished steel by Rs.700- 1, 500 per tonne and negatively impact the already stressed steel industry.
Extrapolation to dumping of sodium nitrite
Deepak Nitrite Ltd. had filed an application and requested the DGAD to review the situation of dumping of sodium nitrite. The DGAD falls under the commerce ministry and recommends the duty while the finance ministry imposes it. It reviewed the anti- dumping duty imposed on imports of sodium nitrite and concluded that dumping of the chemical is still persistent from China and is harming the domestic industry. It recommended the finance ministry to continue to impose the revised anti- dumping duties on all imports of the chemical from China.
As was the case with met coke, sodium nitrite is an important raw material for other industries such as the pharmaceutical industry. The imposition of anti-dumping duties might improve the financial health of companies producing sodium nitrite, but it will also have an impact on the pharmaceutical companies that use it to make medicines. The pharmaceutical industry of India is one of the biggest in the world and ranks 4th in terms of volume of sales. Moreover, it is a significant contributor towards Indias GDP. Increase in prices of sodium nitrite can lead to increase in prices of the drugs made by the industry and hence, decrease the volume of sales and potentially slow growth of the industry. Therefore, the authorities need to thoroughly analyse the impact of anti- dumping duties on import of sodium nitrite on all industries and the economy before imposing it.
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