The Union Government has increased the import duty on certain steel products by 2.5 per cent, effective from June 16 in a bid to stem surging imports mainly from China and protect the domestic industry, which is reeling under profit pressure.

According to a notification, the government has increased the duty on long steel, which is used in construction industry, energy and automotive, to 7.5 per cent from 5 per cent. On flat steel products, which are used in automotive, heavy machinery, packaging and appliances, the import duty has been increased to 10 per cent from 7.5 per cent. The increase in duty is not applicable to countries which have foreign trade agreements with India like Japan and Korea.

“We welcome the move. We have been having dialogue with the government on various measures to protect the local industry which has been suffering,” Sanak Mishra, Secretary-General of Indian Steel Association, told The Hindu. Indian Steel Association is an industry body comprising domestic steel producers, including SAIL, Tata Steel and JSW Steel, among others.

“The industry has been mainly suffering from imports from China. Today’s move will have on average benefit of Rs.600 per tonne. However, we would have liked the increase to be much steeper given the Union budget had a cap of 15 per cent,” Mr. Mishra added.

In fiscal 2015, India imported 9.3 million tonnes of finished steel, which was 71.1 per cent more than in 2014. China accounted for nearly four million tonnes of this.

According to report by ICICI Securities, during April-May 2015-16, steel imports has grown 54.5 per cent on a year on year basis to 1.67 million tonnes.

Increasing imports have caused a downward pressure on domestic steel prices and resulted in subdued operating margins for domestic players, it added.

“However going forward, the hike in import duty is likely to increase the competitiveness of domestic steel majors. Higher import duty is likely to aid in restricting rising steel imports which augurs well. This move is also likely to bring in stability in domestic steel prices. Among the domestic steel majors Tata Steel, JSW Steel and SAIL are likely to be the key beneficiaries,” Dewang Sanghavi, analyst at ICICI Securities wrote in the note.

The development sent the shares of domestic steel companies higher on the bourses.

The move comes just a few weeks after the government imposed anti-dumping duties ranging from $180 to $316 per tonne on certain industrial grade stainless steel.