By holding Indian industry to a higher standard than its global peers, the DGTR is failing in its mandate
India is one of the largest consumption economies in the world. Add to that its billion plus citizens’ penchant for ‘value for money’ products. This potent combination has made the country a prime dumping ground for a wide variety of goods, especially from China, Taiwan and South Korea. Under the circumstances, it is only pertinent that India has strong anti-dumping defences in place to safeguard its growing economy in an era where protectionism is rearing its head globally.
But in reality, that is not the case. The Directorate General of Trade Remedies (DGTR), a Department within the Ministry of Commerce that looks at unfair trade practices by exporters from other countries, is inadequately staffed. On top of that, its decision-making, delayed in many instances, has been arbitrary.
Hurt by dumping
The outcome: Indian economy continues to be hurt by dumping of products from other countries. Those taking the brunt of the impact are not just the big corporations, who have the wherewithal to survive, but MSMEs who are shutting down unable to compete in the market.
Let us start with something as mundane as staffing. DGTR, according to the latest available information, has just seven costing officers and five investigating officers. They are currently investigating 38 cases of dumping. Even here the allocation of work is uneven with select costing and investigation officers handling over six to 12 cases each. This does not include investigations they do to prima facie determine whether a petition filed for anti-dumping duty (ADD) should be taken up. They cannot be more overworked.
Not surprising that it takes way too longer for Indian enterprises to get relief from dumping. In the US an anti-dumping investigation is initiated within weeks, interim duty imposed in three months and final duty is arrived at in six to nine months. In India it could take as much as 33 months from the time the petitioner realises that he is being hurt by dumping.
The actual investigation is completed mostly within the stipulated 18 months from initiation, but initiation itself takes about a year in many cases. The Finance Ministry then takes another three months to impose ADD.
Delays apart, DGTR’s ad hocism when it comes to applying norms is more worrisome. Its decisions, many a times, have gone way beyond what is stipulated by World Trade Organisation (WTO) rules. In its concern against fostering excessive protection, the DGTR is ending up distorting the playing field for the domestic industry instead of its mandate, which is to level it.
Take the case of interim duty. It is a given that once initial investigation reveals injury on account of dumping, an interim duty is levied for immediate relief which will then be replaced by the final duty after extensive investigation. In 2001, all the 33 cases taken up for investigation had interim duties levied. It was 13 out of 13 cases in 2009. But from then on imposition of interim relief began to decline. It was just three out of 22 cases in 2017 and in 2018 (up to June) none of the 13 cases taken up saw imposition of interim relief. Not imposing any interim relief at a time when final duty is invariably delayed is perplexing.
If at all an ADD is imposed, it is for a select period of, say, five years or so. Even after this period if dumping continues, the industry can at the end of five years apply for a sunset review. Globally, the norm is that if a sunset review is applied for, the ADD is extended for one year pending investigation.
In India, the norm has been modified and the industry has been asked to apply for sunset review nine months before the expiry of ADD so as allow time for the DGTR to investigate the case.
When compared to their peers across the world, the Indian players are deprived of protection for a year. This is critical because the DGTR, of late, has been rejecting almost every sunset review application. In 2013 and 2014, the percentage of duty extension post a sunset review was 100 per cent. In 2017 it was 0 per cent, and in 2018 only one of seven reviews was the duty extended.
This is because the DGTR is increasingly hesitant to extend ADD beyond 10 years on the grounds that this period is good enough for the industry to become competitive. But the industry players argue why the DGTR should hold them to higher standards when Brazil, the US, Canada and the EU have ADDs running for 20 years and more. Their stand is that as long as dumping continues ADDs need to be in place to protect the domestic industry.
The affected industry is also held to higher standard when it comes to the quantum of duty. Norms allow countries to levy ADD based on either the dumping margin or injury margin. India opts for lower of the two. What makes things worse is the way freight, cost of inputs or operating efficiencies is treated, which invariably deflates the injury margin. Then there is ‘public interest’. There have been instances where the DGTR has recommended ADD but the Finance Ministry has demurred on the ground that low-priced imports are good for the country.
It happened in the case of Penicillin G earlier and solar panels (safeguard duty has since been imposed), more recently. This unique Indian policy cannot be more myopic as what is in ‘public interest’ today will end up hurting the country in the long term.
Predatorily priced imports will eventually kill the domestic industry and make the country dependent on imports. Once that happens companies exporting the product to India will stop being charitable and jack up the prices.
These policies do give credence to entrepreneurs’ suspicion that the authorities still view them as profiteers and approach the issue with an anti-business, dirigisme mindset. It’s time to correct this.