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Finance Ministry rejects plan to impose safeguard duty on optical fibre

The finance ministry has rejected a recommendation by the Directorate General of Trade Remedies (DGTR) under the commerce ministry to impose a 10% safeguard duty on importing single-mode optical fibre that is used mainly to provide broadband services.

“The central government examined the recommendation of the designated authority (DGTR) and decided not to impose the safeguard measure,” India informed the World Trade Organization (WTO) on 30 March.

Domestic producers Sterlite Technologies Ltd and Birla Furukawa Fibre Optics Pvt. Ltd had complained about the surge in fibre imports in July 2019.

The DGTR investigated the matter and, in August 2020, recommended a 10% safeguard duty for one year to protect the domestic industry from serious injury caused by increased imports.

Optical fibre is imported from countries, including China, Japan, the US and South Korea. Imports of optical fibre increased by 271% in 2018-19 and 243% in January 2019 to June 2019 from the base year 2016-17. In 2020, China remained the top exporter of optical fibre to India, followed by Japan, South Korea and the US.

While anti-dumping duty is imposed against a specific country if there is a sudden drop in the price of an imported item, safeguard duty is not country-specific, and a sudden surge in imports irrespective of a price drop is considered to be a fit case to safeguard interests of domestic industry.

The applicants had submitted that imports of optical fibre increased significantly in 2018-19 and had remained at the increased levels in the most recent period of January-June 2019.

They claimed that they were not able to compete with the imports and regain their market share, forcing them to close down or keep part of their production facilities idle, and requested imposition of provisional safeguard duty to mitigate their injury.

They also submitted that “unforeseen developments” such as the decline in demand in the Chinese optical fibre market; an anti-dumping duty imposed by China on optical fibre imported from India, the US and Japan; policy restrictions imposed by countries like the US and Australia on import of telecom equipment from China and global overcapacity fuelled the sudden surge in imports to India.

Japan’s Sumitomo Electric Industries Ltd, however, submitted that there are no critical circumstances for imposition of safeguard duty.

It said while there was a surge in imports in the September quarter of 2018-19, the imports substantially declined later.

“Insufficiency in showing increased imports, as imports from all countries, including Japan, does not show an increasing trend. The injury, if any, being caused to the domestic industry is only on account of surge in imports from China,” it said.
The Japanese government, in fact, submitted that imposing safeguard measures would frustrate India’s digital infrastructure development projects as such duties would not be in the national interest.

However, DGTR concluded that the period of decline in market share of the domestic industry sales, capacity utilization and profitability directly coincide with the period when there was a sudden and significant surge in imports and the recent decline in demand and, consequently, in imports could be a temporary phenomenon, and such a decline that cannot be confirmed as long-lasting phenomena, cannot undo the damage of the previous increase in imports.

“Thus, the overcapacity created in 2018-19, coupled with decreased demand forced the Single mode optical fibre manufacturers to look for new avenues to offload their excess production. At the same time, the announcement of the New Digital Communications Policy, 2018, by the government of India, focusing on widespread digitization in India along with the announcement of the launch of fibre-to-the-home (FTTH) services by Reliance Jio, created huge demand possibility in India, thereby making it a very lucrative export target during 2018-19,” it added. Livemint

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