US to review Indian steel subsidies

A delegation from the US is likely to visit India in the first week of May to analyse the needs and limitations of the domestic steel industry.

The decision is a fallout of India's repeated requests to members of the Organisation of Economic Co-operation and Development to allow subsidies to certain developing countries where the per capita consumption of steel is low. A final decision on the issue will be taken in May.

India had urged the members of the OECD to re-consider the decision taken this week to remove all subsidies and cut down on global steel capacity in a meeting held this week.

A delegation from India, under the stewardship of JP Singh, joint secretary, ministry of steel, suggested that special and differential treatment be continued within the purview of the provisions of the World Trade Organisation agreement on subsidies and countervailing measures for developing nations.

The Indian delegation highlighted the necessity of making efforts to ensure that developing countries secure a share in the growth of international trade, commensurate with the needs of their economic development.

The special and differential treatment provisions were meant to ensure that equal rules did not apply to unequal players, the Indian delegation pointed out.

The delegation also said a large part of the Indian steel industry was old and needed to be modernised, a process which would help increase productivity.

"We have made a presentation on the Indian steel scenario to the OECD members and we have explained that the per capita consumption of steel in India is still low and needs to be increased. This will require adding certain capacities," Singh told Business Standard.

In December 2002, Organisation of Economic Co-operation and Development had decided to eliminate subsidies that were being provided to the steel industry by member countries, who noted that government aid in the form of subsidies had been the root cause of over-production and low prices.

The subsidies had also led to a distortion in the market by directing investment to steel at the cost of other industries, the participants noted.