Finance ministry rejects DGTR’s recommendation to levy safeguard duty on optical fibre: Report

The finance ministry has rejected the Directorate General of Trade Remedies (DGTR) recommendation to levy a 10% safeguard duty on imports of single-mode optical fibre, according to a Mint report.

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

Homegrown companies Sterlite Technologies and Birla Furukawa Fibre Optics had sought investigations by the Directorate General of Trade Remedies (DGTR) in 2019, claiming that affordable imports were hurting the homegrown fibre cable industry.

DGTR investigated the claims, and in August 2020, recommended a 10% safeguard duty for one year to help homegrown companies recover from the injury caused by increased imports.

According to the publication, imports of optical fibre increased by a staggering 271% in 2018-19 and 243% from January 2019 to June 2019, considering 2016-17 as the base year. China remained the top exporter of optical fibre to India, followed by Japan, South Korea, and the U.S.

To be sure, the safeguard duty is a trade remedy for the World Trade Organization (WTO) member countries and could be imposed to offer a level-playing field to local players in case of a sudden spike in imports of a product under the treaty.

The applicants argued that they were losing market share due to increased imports, forcing them to shut down or keep production lines partially functional, and requested the imposition of safeguard duty to mitigate the loss caused during the period.

The sudden surge in imports to India, according to them, was driven by three factors: decline in demand in the Chinese optical fibre market; the anti-dumping duty imposed by China on fibre cable imports from India, the U.S., and Japan; restrictions imposed by the U.S. and Australia on procurement of Chinese telecom gear, and global overcapacity.

Japan’s Sumitomo Electric Industries Ltd, however, opined that there is no requirement for imposition of safeguard duty, as even though imports surged in September quarter of 2018-19, they substantially declined later.

“The injury, if any, being caused to the domestic industry is only on account of surge in imports from China,” it was quoted as saying by the publication.

However, the DGTR under the commerce ministry, concluded that the period of decline in the market share of the domestic industry sales, capacity utilization and profitability came at a time when there was a sudden rise in imports. It added that the recent decline in demand, and consequently in imports, could be short-lived, and cannot be said to be a long-lasting phenomenon, and as such cannot undo the damage caused by previous increase in imports.

“… 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.