Despite India being world’s second largest producer of stainless steel, its steel industry was under stress as China was subsidizing its export and flooding the Indian market with cheaper variants.

New Delhi (Sputnik) – In a first of its kind move, the Indian government has imposed heavy taxation on the import of stainless steel flat products from China. A notification issued by the finance ministry prescribes an 18.95% countervailing duty (CVD) on imports for the next five years. Countervailing duty is country-specific and is imposed to safeguard domestic industry against unfair trade subsidies provided by the local governments of the exporting country.

India investigators have found that China has been providing 81 types of subsidies to its industries under five different heads including grants (0.55%), export financing (0%), tax & VAT incentives (2.3%), provision of goods & services (15.78%) and preferential loans and lending totaling 18.95%.

"CVD on Stainless Steel will strengthen the ongoing efforts of Indian industry for moving towards 100 % quality regime for better safety and health of users. This will provide a level playing field to the industry to grow to its full potential after attaining 2nd largest rank in stainless steel production in the world in 2016," Narendra Singh Tomar, India's Ministry of Steel said on Friday.

The investigation was initiated in April 2016 by the India's Directorate General of Anti-Dumping and Allied Duties (DGAD) in response to a surge in subsidized imports of stainless steel flat products. Indian companies had complained that imports were distorting the domestic market which was leading to financial stress in the industry. A research report prepared by country's largest bank State Bank of India said that top five steel companies of India owe more than $22.4 billion to banks. The steel industry is one of the biggest job providers in the country's manufacturing sector.

The Indian government had also imposed the Stainless Steel Quality Control Order (QCO) and other trade remedial measures in recent past to save domestic steel companies from stress.