India is considering imposing a 20 per cent anti-dumping duty on imported steel after its steelmakers complained they have been hit by a wave of cheap imports — mainly from China and Russia.

The finance ministry said the country’s directorate-general of safeguards had recommended a 200-day charge of 20 per cent on hot-rolled coiled (HRC) steel. These are described as “key” by analysts and are used in the car industry and other areas.

The proposal was spurred by a July complaint from three of India’s largest steel companies, Steel Authority of India, Essar Steel and JSW Steel, who claim between them more than half of the total production of HRC in India.

Analysts suggested these companies, alongside peers like Tata Steel, benefit from an imposition of the tariff as it would allow them to push volumes and prices higher.

The recommendation will be sent to a safeguards board before the finance ministry takes a final decision. India has already raised taxes on imported steel, increasing the duty from 10 per cent to 12.5 per cent last month.

In June, New Delhi also imposed anti-dumping duties on some stainless steel products from China, Malaysia and South Korea.

Prices of HRC products have fallen nearly 20 per cent in India because of a surge of imports led by China, Russia and Ukraine — a trend that has been exacerbated by the depreciation of the Chinese renminbi, according to Bank of America.

India’s steel producers have complained that market prices are now below their production costs, and have appealed for greater protection from cheap imports, including the imposition of anti-dumping duties.

India’s steel imports jumped 58 per cent in the first four months of this financial year compared with the same period last year.

Arun Jaitley, finance minister, this week said that New Delhi was seriously considering a “defensive move” but said the interests of both steel producers and companies that use steel as a raw material had to be weighed up.

“We have to balance the interest of the consuming industry along with the steel manufacturing industry,” he said.

While domestic prices have already risen slightly in anticipation of the anti-dumping duties, analysts cautioned a rise is by no means assured.

In 2009 — when Indian steel producers faced similar pressures — India’s directorate-general of safeguards similarly recommended the imposition of anti-dumping duties, but New Delhi held back. “History suggests that it’s not a mere formality,” investment bank Macquarie said in research note.

India is the latest country grappling with an onslaught of cheap steel from China, which has the capacity to produce 1.1bn tons, far more than it needs for its slowing domestic economy. Both the US and Europe have recently imposed anti-dumping duties to try to protect their domestic industries.

The woes of India’s steel producers will have repercussions for the entire economy, especially the country’s banking system, which has lent nearly $60bn to the sector.

According to estimates by Credit Suisse, nearly half of that $60bn debt is already highly stressed, although it said little of this is acknowledged as non-performing assets by India’s public sector banks.