COUNTERVAILING DUTY (Syllabus: GS Paper 3 - Economy)

News-CRUX-10     25th July 2023        

Context: The Prime Minister’s Office (PMO) has initiated discussions on the potential imposition of countervailing duty (CVD) on stainless steel, raising hopes within the industry that such an action will curb cheap imports from China and support small and medium producers in India.

Countervailing duty 

  • The PMO intervened after the finance ministry ruled out imposing the duty to offset the effects of subsidies provided by foreign governments to their producers despite the steel and commerce ministries supporting the implementation.
  • As cheap imports flood the market, domestic steelmakers, especially smaller ones, are freezing hiring and expansion plans and resorting to commodity trading. India had previously imposed CVD on steel, but removed it in the Union Budget 2021-22.
  • The steel ministry and the Directorate General of Trade Remedies (DGTR) under the commerce ministry had recommended a 19% CVD to the finance ministry, the ultimate authority in duty matters. 

Countervailing duty (CVD)

    • About: It is a specific form of duty that the government imposes in order to protect domestic producers by countering the negative impact of import subsidies. 
      • CVD is thus an import tax by the importing country on imported products.
      • The World Trade Organization (WTO) permits the imposition of countervailing duty by its member countries.
      • In India, the CVD is imposed as an additional duty besides customs on imported products when such products are given tax concession in the country of their origin.
      • The levy of anti-dumping duty is both exporter-specific and country-specific. 
      • It extends to the imports from only that country in respect of which dumping has been alleged and the complaint has been filed and duty recommended. 
      • Such duty does not apply to imports from other countries in respect of which the domestic industry has not alleged dumping.
  • Imposition of countervailing measures in India: The countervailing measures in India are administered by the Directorate General of Anti-dumping and Allied Duties (DGAD), in the commerce and industry ministry’s department of commerce. 
  • While the department of commerce recommends anti-dumping duty, provisional or final, it is the department of revenue in the finance ministry that acts upon the recommendation within three months and imposes such duties.
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