Leading domestic steel makers have alleged that overseas steel producers, mainly from China, have effectively side-stepped paying the enhanced import duty of 7.5 per cent by taking advantage of an anomaly in the Customs Act and selling their produce in India as alloy steel.

In a meeting with steel secretary DRS Chaudhary on May 30, the Indian steel firms have said that in view of the increase in the import duty on non-alloy steel from 5 per cent to 7.5 per cent in the Finance Bill 2012-13, the Chinese steel exporters have started bypassing the import duty classification by taking advantage of an anomaly in the duty structure.

Under Chapter 72 of the Customs Act, addition of a minimum of 0.0008 per cent boron to steel changes the classification of this metal from non-alloy to alloy steel, which is what the Chinese companies are resorting to. They are effectively adding the minimal quantity of boron in their produce and shipping them to India as alloy steel and are thereby avoiding paying the increased import duty.

The anomaly in duty structure, coupled with 9 per cent duty incentive extended by the Chinese government to its exporters, has created a precarious situation for the Indian steel firms, they pointed out. The Indian firms have asked the steel ministry to take up the issue with the finance ministry to ensure that the anomaly in the duty structure is corrected at the earlier, failing which, they have said there could be a serious rise in the inventory levels of domestic firms.