India may soon mandate the use of local steel in government infrastructure projects worth billions of dollars, sources said, pitching it as a WTO-compliant protectionist measure aimed at further cutting cheap imports, mainly from China.
The government expects the move to boost sales of local companies such as JSW Steel and Tata Steel, and eventually attract global steelmakers such as ArcelorMittal and POSCO to invest in the country, five steel ministry sources told Reuters .
India, the world’s third-largest steel consumer, has budgeted a record $59 billion for 2017-18 for steel-intensive infrastructure projects such as ports, roads, railways and power.
“The preference in procurement will enhance demand and thus production. Definitely it is ‘Make in Steel’ and thus ‘Make in India’,” Steel Minister Chaudhary Birender Singh told Reuters.
“It is preference with no compromise on quality and competitive pricing. To use domestic produce is an acceptable norm.”
Within WTO rules
Analysts said a similar proposal by U.S. President Donald Trump requiring the use of domestic steel to build two energy pipeline projects could violate international trade laws, but Indian officials say their plan will fall within WTO rules.
A government document on the proposal, seen by Reuters, cites an article under the General Agreement on Tariffs and Trade of the World Trade Organisation, allowing an exception to “procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale.”
Abhijit Das, head of the New Delhi-based think-tank Centre for WTO Studies, said the provision had been invoked by the United States in the past and India could do the same. The protectionist move would, however, shrink foreign companies’ sales in the world’s fastest growing steel market.
