18.3.2016   

EN

Official Journal of the European Union

L 73/1

(1)

On 11 March 2015, the European Commission (‘the Commission’) initiated an anti-subsidy investigation with regard to imports into the Union of tubes and pipes of ductile cast iron (also known as spheroidal graphite cast iron) originating in India (‘the country concerned’) on the basis of Article 10 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union  (2) (‘the Notice of Initiation’).

(2)

The Commission initiated the investigation following a complaint lodged on 26 January 2015 by Saint-Gobain PAM Group, (‘the complainant’) on behalf of producers representing more than 25 % of the total Union production of tubes and pipes of ductile cast iron. The complaint contained prima facie evidence of subsidisation and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3)

Prior to the initiation of the proceedings and in accordance with Article 10(7) of the basic Regulation, the Commission notified the Government of India (‘the GoI’) that it had received a properly documented complaint alleging that subsidised imports of tubes and pipes of ductile cast iron originating in India were causing material injury to the Union industry. The GoI was invited for consultations with the aim of clarifying the situation as regards the content of the complaint and arriving at a mutually agreed solution. The GoI accepted the offer of consultations and consultations were subsequently held. During the consultations, no mutually agreed solution could be arrived at.

(4)

Subsequently, the Commission informed all parties of the essential facts and considerations on the basis of which it intended to impose a definitive countervailing duty on imports into the Union of tubes and pipes of ductile cast iron originating in India. In addition another Indian Producer Tata Metaliks DI Pipes Limited (‘Tata’) made themselves known and provided comments.

(5)

All parties were granted a period within which they could make comments on the disclosure.

(6)

On 28 January 2016 a hearing with the Hearing Officer for Trade was held at the request of Electrosteel Castings Limited.

(7)

On 20 December 2014, the Commission published a notice in Official Journal of the European Union  (3) on the initiation of an anti-dumping investigation against imports into the Union of tubes and pipes of ductile cast iron originating in India based on Council Regulation (EC) No 1225/2009 (4) (‘the basic anti-dumping Regulation’).

(8)

On 18 September 2015, by Commission Implementing Regulation (EU) 2015/1559 (5), the Commission imposed a provisional anti-dumping duty on imports of tubes and pipes of ductile cast iron originating in India (‘provisional anti-dumping Regulation’). The definitive findings of that investigation are subject to a separate Regulation (6).

(9)

The injury, causation and Union interest analyses performed in the present anti-subsidy and the parallel anti-dumping investigation are mutatis mutandis identical, since the definition of the Union industry, the representative Union producers and the investigation period are the same in both investigations.

(10)

In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In particular, the Commission informed the complainant, other known Union producers, the known exporting producers and the Indian authorities, known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

(11)

Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. No interested party requested a hearing to comment on the initiation.

(12)

In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 27 of the basic Regulation.

(13)

No sampling of Union producers was necessary. There are only three companies or group of companies manufacturing the product concerned in the Union and two of them, representing around 96 % of the total Union production, cooperated with the investigation.

(14)

As regards unrelated importers, to decide whether sampling was necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation. No unrelated importers made themselves known within the time limits set out in the Notice of Initiation.

(15)

To decide whether sampling is necessary and, if so, to select a sample, the Commission asked all exporting producers in India to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the Republic of India to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(16)

Three exporting producers in the country concerned provided the requested information and agreed to be included in the sample. They covered 100 % of the exports from India during the investigation period. Therefore, the Commission decided that sampling was not necessary.

(17)

Questionnaires were sent to three exporting producers or groups of producers in India, to the three Union producers as well as to users that made themselves known within the time limits set out in the Notice of Initiation.

(18)

Questionnaire replies were received from two out of the three Indian exporting producers. The Commission therefore considered that the third exporting producer ceased cooperation with the investigation.

(19)

At initiation stage, the cooperating Union producers and users agreed that the information collected in the parallel anti-dumping investigation could also be used in this proceeding. Several dozen users submitted information in addition to those which had already made themselves known in the parallel anti-dumping investigation.

(20)

The Commission sought and verified all the information provided by the exporting producers in India and deemed necessary for a provisional determination of subsidisation. Verification visits were carried out at the following companies:

(21)

The investigation of subsidy and injury covered the period from 1 October 2013 to 30 September 2014 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2011 to the end of the investigation period (‘the period considered’).

(22)

The product concerned is tubes and pipes of ductile cast iron (also known as spheroidal graphite cast iron) (‘ductile pipes’) originating in India, currently falling within CN codes ex 7303 00 10 and ex 7303 00 90. These CN codes are given for information only.

(23)

Ductile pipes are used for drinking water supply, sewage disposal and irrigation of agricultural land. The transportation of water through ductile pipes may be based on pressure or solely on gravity. The pipes range between 60 mm and 2 000 mm and are 5,5, 6, 7 or 8 metres long. They are normally lined with cement or other materials and externally zinc-coated, painted or tape-wrapped. The main final users are public utility companies.

(24)

Jindal and the Government of India (‘GOI’) claimed that ductile pipes, which are not coated, neither internally nor externally (‘bare pipes’), should be excluded from the product concerned on the basis that such tubes and pipes are semi-finished products with different physical, technical and chemical characteristics and cannot be used for conveying water without further processing. Bare pipes are also not interchangeable with the product concerned and have a different end-use.

(25)

The complainant contested this claim and argued that all ductile pipes, whether coated or not, share the same basic physical, technical and chemical characteristics and have the same end-use. The complainant further argued that internal and external coating operations are considered as finishing operations, representing only up to 20 % of the total cost of production of ductile pipes, and do not alter the basic characteristics of a ductile pipe. The complainant further stressed that bare pipes as such have no effective end-market/function or use, other than conveying water and sewage, and are not sold on the Union market but must necessarily be coated before being put on the market and to comply with EU standards. In addition, bare pipes of ductile cast iron fall under the same customs code as coated pipes and their exclusion could therefore lead to circumvention of any countervailing measures and undermine the effectiveness of such measures given the Indian exporters' significant capacity to carry out coating in the Union (around 80 000 tonnes annually). In this regard, the complainant further claimed that the Indian imports of bare pipes have increased significantly since 2013 and these imports were almost three times higher in 2015 than in 2013. This trend is likely to continue in the complainant's view.

(26)

The investigation has demonstrated that bare pipes do not have any effective market function/use and are not sold as such on the Union market. These pipes must necessarily undergo further processing, i.e. internal and external coating, before becoming marketable and fulfilling EU standards for conveying water and sewage. While compliance with EU standards is not necessarily a decisive factor for determining the product scope, the fact that additional processing must be carried out on a bare pipe before it can be put into its intended end-use, is a factor that cannot be overlooked when analysing whether a bare pipe is a final product or a semi-finished product only. The Commission therefore finds that bare pipes of ductile cast iron should be considered as semi-finished ductile pipes.

(27)

Semi-finished goods and finished goods may nevertheless be considered to form a single product if: (i) they share the same essential characteristics; and (ii) the additional processing costs are not substantial (7). It is uncontested that the internal and external coating adds to bare pipes a physical characteristic which confers on these pipes an essential and basic characteristic required for their essential use on the Union market, namely the conveyance of water and sewage in accordance with EU standards. Moreover, it is uncontested that the cost for adding internal and external coating to a bare pipe normally accounts for up to 20 % of the total production costs of a ductile pipe. Accordingly, the additional processing must be considered substantial.

(28)

It follows that semi-finished bare tubes and pipes of ductile cast iron cannot be considered forming a single product with the finished (coated internally and externally) ductile pipes and should therefore be excluded from the product concerned.

(29)

Moreover, the Commission did not find that there is a considerable risk of circumvention should bare pipes be excluded from the product scope. The bare pipes are only imported by one related company of Jindal which, contrary to the claim by the complainant, has limited coating capacity in the Union. According to the Commission's verified data the actual capacity is around 15 000 tonnes annually. Moreover, although the imports of bare pipes from India appear to be increasing after the investigation period, the volumes are still modest (less than 10 000 tonnes in 2015) according to information from the complainant. Given the limited coating capacity by the related company in the Union and its current business plan for the forthcoming years in respect of bare pipes, between 15 000 and 21 000 tonnes by 2017, it is unlikely that this production site would be turned into an entry gate for a massive influx of bare pipes with the sole objective to coat them in order to avoid duties for finished pipes in the Union, which could potentially raise an issue under Article 23 of the basic Regulation.

(30)

Jindal requested that flanged pipes of ductile cast iron should be excluded from the product scope.

(31)

Contrary to bare pipes, flanged pipes are pipes of ductile cast iron finally processed with internal and external coating. Flanged pipes are therefore suitable for the conveyance of water and sewage without further processing. Essentially, they are cut in length from full length iron ductile pipes and fitted with flanges to be connected with bolts and nuts while other pipes of ductile iron are connected via a socket. The processing costs for cutting the length and adding flanges cannot be considered to change the basic characteristics of a ductile iron pipe, which is the conveyance of water and sewage or incurring substantive processing costs. Therefore, although some additional processing is required to manufacture flanged pipes from pipes of ductile iron pipes, the Commission considered them to form a single product and the exclusion request is rejected.

(32)

In view of the above considerations, the product concerned is definitively defined as tubes and pipes of ductile cast iron (also known as spheroidal graphite cast iron) (‘ductile pipes’), with the exclusion of ductile pipes without internal and external coating (‘bare pipes’), originating in India, currently falling within CN codes ex 7303 00 10 and ex 7303 00 90.

(33)

The investigation showed that the product concerned as defined above, manufactured and sold in India as well as the product manufactured and sold in the Union have the same basic physical, chemical and technical characteristics and are therefore like products within the meaning of Article 2(c) of the basic Regulation.

(34)

On the basis of the information contained in the complaint and the replies to the Commission questionnaires by the GoI and the exporting producers, the following subsidy practices and specific related measures (schemes), which allegedly involve the granting of subsidies, were investigated:

(35)

The complainant claimed that in the past the GoI provided loan guarantees through the State Bank of India to producers in the steel sector. The benefit conferred is said to be the difference between the amount paid for the loan, which was guaranteed and the amount that would have been paid for a similar loan without Government guarantee. The subsidy is said to consist in the difference between the amount of interest or premium that the company would have paid for the loan if it had been obtained on a commercial basis having regard to benchmarks and the amount it actually paid as a result of the fact that the loan was guaranteed by the GoI.

(36)

The two Indian exporting producers received loans from a number of banks, including the State Bank of India. However those loans were not guaranteed by the GoI. In addition, the interest rates paid were in line with market conditions charged by other banks for similar loans.

(37)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme.

(38)

The complainant claimed that the GoI provides loans to finance R & D projects in the iron and steel sector using the Steel Development Fund. The benefit conferred is said to be the difference between interest charged on loans from the Steel Development Fund and interest which would be charged under market conditions on a commercial loan.

(39)

The two Indian exporting producers did not receive loans from the Steel Development Fund during the IP.

(40)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme.

(41)

The complainant claimed that the GoI provides funds to encourage R & D projects in the iron and steel sector. The benefit is said to correspond to the amount of funding provided (50 % of the costs borne for R & D).

(42)

The two Indian exporting producers did not receive funds under this scheme during the IP.

(43)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme.

(44)

The complainant claimed that one Indian exporting producer was eligible for this scheme. The scheme consists of facilitating the purchase of land for projects envisaging investment of 1 billion rupees and above and if 25 % of land is purchased by the developer on its own. The benefit is said to be the payment by the Rajasthan Government of the remaining 75 % of the value of the land.

(45)

The two Indian exporting producers did not receive funds under this scheme during the IP.

(46)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme.

(47)

The complainant claimed that the exporting producers of the product concerned are eligible for this scheme and it must be presumed that they have applied for it since they export a major part of their output.

(48)

A company registered as an Export Oriented Unit is entitled to exemption from and/or reimbursement of a number of duties and taxes. The benefit is said to be the amount of Government revenues which would be due and are foregone.

(49)

The two Indian exporting producers were not registered as Export Oriented Units during the IP.

(50)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme during the IP.

(51)

The complainant claimed that the exporting producers of the product concerned are eligible for this scheme which entitles to duty credits corresponding to a percentage of the FOB value of exports to certain countries. The duty credits can be used to offset import duties and thus the benefit conferred corresponds to the amount of Government revenues which would be due and are foregone.

(52)

The two Indian exporting producers did not receive duty credits under this scheme during the IP.

(53)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme during the IP.

(54)

The complainant claimed that the exporting producers of the product concerned are eligible for this scheme which allows for duty free import of inputs, fuel, oil, energy sources and catalyst which are used as input in the production process, provided that certain conditions are met. The benefit is said to be the amount of Government revenues which would be due and are foregone.

(55)

The two Indian exporting producers did not benefit from this scheme during the IP.

(56)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme during the IP.

(57)

The complainant claimed that the exporting producers of the product concerned are eligible for this scheme which allows for duty free import of input materials for the production of a specific product or category of products, or intermediate products to be exported or deemed to be exported. The benefit is said to be the amount of Government revenues which would be due and are foregone.

(58)

The two Indian exporting producers did not benefit from this scheme during the IP.

(59)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme during the IP.

(60)

The complainant claimed that the exporting producers of the product concerned are eligible for this scheme, which is similar to the Focus Market Scheme and entitles to duty credits corresponding to a percentage of the incremental growth achieved in the financial year 2012-2013 compared to the financial year 2011-2012. The duty credits can be used to offset import duties and thus the benefit conferred corresponds to the amount of Government revenues which would be due and are foregone.

(61)

The two Indian exporting producers did not benefit from this scheme during the IP.

(62)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme during the IP.

(63)

The complainant claimed that one exporting producer of the product concerned (with operations in Gujarat) is eligible for and has probably benefited from this scheme, which allows for VAT exemption of purchases of goods used in connection with exports. The exemption is said to represents a financial contribution since it reduces the VAT revenues of the government. The benefit conferred corresponds to the amount of Government revenues which would be due and are foregone.

(64)

The two Indian exporting producers did not benefit from this scheme during the IP for the product concerned.

(65)

As a consequence, the Commission did not find any evidence of subsidisation for this scheme during the IP.

(66)

The complainant claimed that the GoI provides goods to steel producers by providing them with iron ore and coal through the grant of captive mining rights (i.e. rights that allowed steel producers to mine iron ore and coal for their own internal use).

(67)

The complainant referred to the applicable Indian legislation concerning mining of iron ore and coal, including recent developments, and mentioned that some Indian producers of the product concerned have their own mines.

(68)

The complainant considered that the captive mining of iron ore is de facto specific, since it is limited to certain enterprises, such as steel producers and that the captive mining of coal is de jure specific, since preference is given in the allocation of coal blocks to steel producers whose annual production capacity exceeds one million tons.

(69)

The complainant considered that the benefit of the captive mining licences for coal to the Indian producers of the product concerned is the difference between, the total cost of the royalties paid for the mining licence, the cost of extraction and refining to bring it up to the required level of quality and the benchmark CIF price of Australian coking coal at the Indian port.

(70)

As regards the benefit of the captive mining licences for iron ore, the complainant considered that the benefit should be assessed: either: (i) having regard to the terms and conditions prevailing on the world market for the purchase of iron ore in accordance with Article 6(d)(ii) of the basic Regulation; or (ii) on the basis of terms and conditions prevailing in India adjusted to account for the effect of the export tax on iron ore since it is a factor which distorts normal market conditions.

(71)

The complainant noted that the United States Department of Commerce (USDOC) investigated and countervailed the Captive Mining of Iron Ore Programme and the Captive Mining of Coal Programme in a number of investigations against imports of Certain Hot-Rolled Carbon Steel Flat Products from India.

(72)

The GoI indicated the legal bases under which mineral concession is processed and granted to the applicants:

(73)

The GoI explained that the iron ore sector in India has always been a deregulated market and that the coal sector was deregulated with effect from January 2000.

(74)

One of the two Indian exporting producers was granted mining rights for iron ore (but not for coal). However the iron ore extracted in that mine is not used for the production of the product concerned (due to its low Fe content) but for other business operations of the group. The producer in question was sourcing the iron ore needed for the production of the product concerned from unrelated suppliers in India.

(75)

The other Indian exporting producers was granted mining rights for coal (but not for iron ore). The volume of coal extracted annually was not enough to satisfy its needs and therefore this producer was also purchasing coal from unrelated suppliers in Australia.

(76)

Following a judgement of the Indian Supreme Court in 2014, this exporting producer showed that all mining rights of coal previously allocated were withdrawn and a competitive bidding procedure is currently in place to obtain coal mining rights in India. The producer in question is therefore no longer procuring coal via captive mining rights. In addition, this exporting producer also showed that under the new procedure on the allocation of the mining rights introduced by the GoI it will legally not be entitled to obtain the mining rights because of the restrictions attached to the procedure.

(77)

As a consequence, the Commission does not need to further analyse this scheme.

(78)

The detailed description of FPS is contained in paragraph 3.15 of the Foreign Trade Policy (FTP) 2009-2014 and in paragraph 3.9 of the Handbook of Procedure (HoP) 2009-2014.

(79)

According to paragraph 3.15.2 of the FTP 09-14, exporters of notified products in Appendix 37D of HOP I 09-14 are eligible for this scheme.

(80)

Under this scheme exports of products listed in Appendix 37D of the HoP are entitled to duty credit equivalent to 2 % of the FOB value. The rate of the duty credit for ductile pipes was increased to 5 % in 2012. Ductile pipes are thus eligible for the duty credit.

(81)

The duty credits under FPS are freely transferable and valid for a period of 24 months from the date of issue of the relevant credit entitlement certificate. They can be used for payment of custom duties on subsequent imports of any inputs or goods including capital goods.

(82)

The credit entitlement certificate is issued from the port from which the exports have been made and after realisation of exports or shipment of goods. As long as the applicant provides to the authorities copies of all relevant export documentation (e.g. export order, invoices, shipping bills, bank realisation certificates), the GoI has no discretion over the granting of the duty credits.

(83)

Both companies used this scheme during the IP.

(84)

The FPS provides subsidies within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation. A FPS duty credit is a financial contribution by the GoI, since the credit will eventually be used to offset import duties, thus decreasing the GoI's duty revenue which would be otherwise due. In addition, the FPS duty credit confers a benefit upon the exporter, because it improves its liquidity.

(85)

Furthermore, the FPS is contingent in law upon export performance, and therefore deemed to be specific and countervailable under Article 4(4), first subparagraph, point (a) of the basic Regulation.

(86)

This scheme cannot be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation. It does not conform to the strict rules laid down in Annex I point (I), Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution drawback) of the basic Regulation. An exporter is under no obligation to actually consume the goods imported free of duty in the production process and the amount of credit is not calculated in relation to actual inputs used. There is no system or procedure in place to confirm which inputs are consumed in the production process of the exported product or whether an excess payment of import duties occurred within the meaning of point (I) of Annex I and Annexes II and III of the basic Regulation. An exporter is eligible for FPS benefits regardless of whether it imports any inputs at all. In order to obtain the benefit, it is sufficient for an exporter to simply export goods without demonstrating that any input material was imported. Thus, even exporters which procure all of their inputs locally and do not import any goods which can be used as inputs are still entitled to benefit from FPS. Moreover, an exporter can use FPS duty credits in order to import capital goods although capital goods are not covered by the scope of permissible duty drawback systems, as set out in Annex I point (I) of the basic Regulation, because they are not consumed in the production of the exported products.

(87)

The new five-year Foreign Trade Policy 2015-2020 introduced a new scheme named ‘Merchandise Exports from India Scheme’ (MEIS) which replaced a number of pre-existing schemes including the FPS. Since the eligibility criteria for FPS and for MEIS are basically the same, it is clear that the FPS was not discontinued but just renamed and the benefit conferred by the FPS continues to be conferred by the new scheme. As a consequence the benefit conferred by the FPS can still be countervailed.

(88)

After disclosure, ECL claimed that MEIS cannot automatically be considered as a variant or a replacement scheme of the FPS. The Commission rejected this argument since the eligibility criteria and beneficiaries for FPS and MEIS are the same as far as the ductile iron pipes producers are concerned. In its questionnaire response, the GoI acknowledged itself that FPS ‘has been merged into a new scheme (MEIS)’ (8). Therefore, this claim was rejected.

(89)

However there is a difference in the amount of benefit conferred by the two schemes. The duty scrip rate offered by the MEIS is currently 2 % of the FOB value of exports (it was 5 % for the FPS during the IP).

(90)

The two Indian producers claimed before and after definitive disclosure that this lower value should be the parameter for quantifying the amount of benefit to be countervailed, if any. ECL referred to the Commission ‘Guidelines for the calculation of the amount of subsidy in countervailing duty investigations’ (9) and Example 1 where the revised benefit applicable to the latter part of the IP should be applied ‘if the change is permanent in nature’. This claim was also raised by the GoI after definitive disclosure.

(91)

The Commission rejected this claim for the following reason. Pursuant to Article 5 of the basic Regulation, ‘the amount of countervailable subsidies shall be calculated in terms of the benefit conferred on the recipient which is found to exist during the investigation period for subsidisation’. During the IP the benefit conferred on the exporting producers was a duty credit of 5 % of the FOB value of exports of the product concerned.

(92)

Pursuant to Article 11 of the basic Regulation, ‘information relating to a period subsequent to the IP shall not, normally, be taken into account’. That means that post-IP developments can be taken into account only in exceptional circumstances, namely when ignoring them would be ‘manifestly inappropriate’ (10). This threshold has been reached, for example, when the 10 new Member States acceded to the European Union in 2004, triggering a duty for the Commission to investigate whether the information obtained during the investigation was still representative for the enlarged EU (11).

(93)

This threshold is, however, not met in the present case. The basic subsidy scheme remains in place post-IP and the exporters have benefitted from the 5 % rate during the IP. The assumption that the reduced rate of 2 % post-IP is permanent in nature, cannot be confirmed either, as the government is empowered to change the rate of the scheme at any time (12). Such changes are not only hypothetical in nature, as the practice under the previous regime shows. The former FPS had been introduced by law in 2009, and the Government changed the rate from 2 % to 5 % effective from 31 December 2012 (13). In view of all these factors, the Commission concludes that countervailing an amount of 5 % for the FPS during the IP is not manifestly inappropriate. If the current rate of 2 % proves its longevity, the exporters will be free to request an interim review demonstrating the lasting change of circumstances with respect to this subsidy scheme.

(94)

The amount of countervailable subsidies was calculated on the basis of the benefit conferred on the recipient, which is found to exist during the IP as booked by the cooperating exporting producer on an accrual basis as income at the stage of export transaction. In accordance with Article 7(2) and 7(3) of the basic Regulation this subsidy amount (numerator) has been allocated over the export turnover during the IP as appropriate denominator, because the subsidy is contingent upon export performance and it was not granted by reference to the quantities manufactured, produced, exported or transported.

(95)

The subsidy rate established with regard to this scheme during the IP for the company ECL and its subsidiary Srikalahasthi Pipes Limited, (hereinafter referred to as the ‘ECL Group’) amounted to 4,35 % and for the company Jindal Saw India amounted to 3,11 %.

(96)

The detailed description of the EPCGS is contained in Chapter 5 of the FTP 2009-2014 as well as in Chapter 5 of the HoP 2009-2014.

(97)

Manufacturer-exporters, merchant-exporters ‘tied to’ supporting manufacturers and service providers are eligible for this scheme.

(98)

Under the condition of an export obligation, a company is allowed to import capital goods (new and second-hand capital goods up to 10 years old) at a reduced rate of duty. An export obligation is an obligation to export a minimum value of goods corresponding to, depending on the sub-scheme chosen, six or eight times the amount of duty saved. To this end, the GoI issues, upon application and payment of a fee, an EPCGS licence. The scheme provides for a reduced import duty rate of 3 % applicable to all capital goods imported under the scheme. In order to meet the export obligation, the imported capital goods must be used to produce a certain amount of export goods during a certain period. Under the FTP 2009-2014 the capital goods can be imported with a 0 % duty rate under the EPCGS but in such case the time period for fulfilment of the export obligation is shorter.

(99)

The EPCGS licence holder can also source the capital goods indigenously. In such case, the indigenous manufacturer of capital goods may avail himself of the benefit for duty free import of components required to manufacture such capital goods. Alternatively, the indigenous manufacturer can claim the benefit of deemed export in respect of supply of capital goods to an EPCGS licence holder.

(100)

It was found that the two companies received concessions under the EPCGS which could be allocated to the product concerned during the IP.

(101)

The EPCGS provides subsidies within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation. The duty reduction constitutes a financial contribution by the GoI, since this concession decreases the GoI's duty revenue which would be otherwise due. In addition, the duty reduction confers a benefit upon the exporter, because the duties saved upon importation improve the company's liquidity.

(102)

Furthermore, the EPCGS is contingent in law upon export performance, since such licences cannot be obtained without a commitment to export. Therefore, it is deemed to be specific and countervailable under Article 4(4), first subparagraph, point (a) of the basic Regulation.

(103)

The EPCGS cannot be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation. Capital goods are not covered by the scope of such permissible systems, as set out in Annex I point (I), of the basic Regulation, because they are not consumed in the production of the exported products.

(104)

The new five-year Foreign Trade Policy 2015-2020 maintained this scheme, although it provides only for the 0 % duty option. Since the eligibility criteria are basically the same, it cannot be said that the EPCGS was discontinued and thus should no longer be countervailable.

(105)

The amount of countervailable subsidies was calculated, in accordance with Article 7(3) of the basic Regulation, on the basis of the unpaid customs duty on imported capital goods spread across a period which reflects the normal depreciation period of such capital goods in the industry concerned. The amount so calculated, which is attributable to the IP, has been adjusted by adding interest during this period in order to reflect the full time value of the money. The commercial interest rate during the investigation period in India was considered appropriate for this purpose.

(106)

In accordance with Article 7(2) and 7(3) of the basic Regulation, this subsidy amount has been allocated over the appropriate export turnover during the IP as the appropriate denominator because the subsidy is contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

(107)

After definitive disclosure, ECL claimed that EPCGS are used in the total production of the ductile iron pipes and not only for the production of the exported goods. Therefore, it requested that the subsidy should be calculated on the basis of the total turnover rather than on the basis of the export turnover.

(108)

The Commission rejected this claim since, as already indicated above, the subsidy is contingent upon export performance only. This approach is also consistent with the Commission's practice on the same scheme (14).

(109)

The same exporting producer requested that the benefit should not take into account entries/machines which have already been depreciated long before the IP. The Commission accepted this claim and informed the company accordingly.

(110)

The subsidy rate established with regard to this scheme during the IP for the ECL Group amounted to 0,03 % and for the company Jindal Saw India amounted to 0,38 %.

(111)

The detailed description of the DDS is contained in the Custom & Central Excise Duties Drawback Rules, 1995 as amended by successive notifications.

(112)

Any manufacturer-exporter or merchant-exporter is eligible for this scheme.

(113)

An eligible exporter can apply for drawback amount which is calculated as a percentage of the FOB value of products exported under this scheme. The drawback rates have been established by the GoI for a number of products, including the product concerned. They are determined on the basis of the average quantity or value of materials used as inputs in the manufacturing of a product and the average amount of duties paid on inputs. They are applicable regardless of whether import duties have actually been paid or not. The DDS rate for the product concerned during the IP was 1,9 % of the FOB value.

(114)

To be eligible to benefits under this scheme, a company must export. At the moment when shipment details are entered in the customs server (Icegate), it is indicated that the export is taking place under the DDS and the DDS amount is fixed irrevocably. After the shipping company has filed the Export General Manifest (EGM) and the customs office has satisfactorily compared that document with the shipping bill data, all conditions are fulfilled to authorise the payment of the drawback amount by either direct payment on the exporter's bank account or by draft.

(115)

The exporter also has to produce evidence of realisation of export proceeds by means of a Bank Realisation Certificate (BRC). This document can be provided after the drawback amount has been paid but the GOI will recover the paid amount if the exporter fails to submit the BRC within a given delay.

(116)

The drawback amount can be used for any purpose.

(117)

Indeed, in accordance with Indian accounting standards, the duty drawback amount can be booked on an accrual basis as income in the commercial accounts, upon fulfilment of the export obligation.

(118)

It was also found that the two Indian companies received benefits under the DDS during the IP.

(119)

The DDS provides subsidies within the meaning of Article 3(1)(a)(I) and Article 3(2) of the basic Regulation. The so-called duty drawback amount is a financial contribution by the GoI as it takes form of a direct transfer of funds by the GoI. There are no restrictions as to the use of these funds. In addition, the duty drawback amount confers a benefit upon the exporter, because it improves its liquidity.

(120)

The rate of duty drawback for exports is determined by the GoI on a product by product basis. However, although the subsidy is referred to as a duty drawback, the scheme does not have the characteristics of a permissible duty drawback system or substitution drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation. The cash payment to the exporter is not linked to actual payments of import duties on raw materials and is not a duty credit to offset import duties on past or future imports of raw materials.

(121)

After disclosure, the GoI first argued that the Commission has not provided the requirements which it considered imperative for DDS to constitute a legitimate duty drawback system or provided a rational for such a determination. Second, in the GoI's opinion, there is an adequate link between the drawback rates as well as the duties paid on raw materials. This is because the GoI takes into account the average quantity or value of materials used as inputs in the manufacturing of the product as well as the average amount of duties paid on inputs in determining the duty drawback rates. ECL put forward arguments similar to the ones of the GoI.

(122)

The Commission rejected these arguments for the following reasons. On the first argument, the Commission stated in the disclosure the reasons for which it did not consider the scheme a permissible duty drawback system or substitution drawback system. Indeed, it clarified that the cash payment to the exporter is not linked to actual payments of import duties on raw materials and is not a duty credit to offset import duties on past or future imports of raw materials.

(123)

Regarding the second claim, the Commission does not consider that the alleged link between the drawback rates and the duties paid on raw materials is sufficient in order for the scheme to conform to the rules laid down in Annex I item (I), Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution drawback) of the basic Regulation. In particular, the amount of credit is not calculated in relation to actual inputs used. Moreover, there is no system or procedure in place to confirm which inputs are consumed in the production process of the exported product or whether an excess payment of import duties occurred within the meaning of item (I) of Annex I, and Annexes II and III of the basic Regulation. Therefore, this claim was also rejected.

(124)

Consequently, the payment which takes form of a direct transfer of funds by the GoI subsequent to exports made by exporters has to be considered as a direct grant from the GoI contingent on export performance and is therefore deemed to be specific and countervailable under Article 4(4), first subparagraph, point (a) of the basic Regulation.

(125)

In view of the above, it is concluded that DDS is countervailable.

(126)

In accordance with Article 3(2) and Article 5 of the basic Regulation, the Commission calculated the amount of countervailable subsidies in terms of the benefit conferred on the recipient, which was found to exist during the review investigation period. In this regard, the Commission established that the benefit is conferred on the recipient at the time when an export transaction is made under this scheme. At this moment, the GOI is liable to the payment of the drawback amount, which constitutes a financial contribution within the meaning of Article 3(1)(a)(I) of the basic Regulation. Once the customs authorities issue an export shipping bill which shows, inter alia, the amount of drawback which is to be granted for that export transaction, the GOI has no discretion as to whether or not to grant the subsidy. In the light of the above, the Commission considered appropriate to assess the benefit under the DDS as being the sum of the drawback amounts earned on export transactions made under this scheme during the review investigation period.

(127)

In accordance with Article 7(2) of the basic Regulation, the Commission allocated these subsidy amounts over the total export turnover of the product concerned during the review investigation period as appropriate denominator, because the subsidy is contingent upon export performance and it was not granted by reference to the quantities manufactured, produced, exported or transported.

(128)

One of the two companies calculated the share of raw material used in the production of the product concerned which were imported and on which it paid duties. This company subsequently claimed, both before and after definitive disclosure, that, if the Commission were to countervail the benefit conferred by the DDS, it should not countervail the total amount of DDS received, but only the amount in excess of the duties actually paid on imports of input used in the production of the product concerned. The company's claim was also supported by the GoI in its comments to the definitive disclosure.

(129)

The Commission rejected this claim because, as explained in Section (d) ‘Conclusion on the DDS’ above, notwithstanding the name ‘Duty Drawback’, this scheme is in essence a direct transfer of funds rather than revenue foregone. The cash payment to the exporter is not linked to actual payments of import duties on raw materials and is not a duty credit to offset import duties on past or future imports of raw materials. Therefore, there is no certainty that the share of raw material imported and used in the production of ductile pipes will remain unchanged.

(130)

The subsidy rate established with regard to this scheme during the IP for the ECL Group amounted to 1,66 % and for the company Jindal Saw India amounted to 1,37 %

(131)

The complainant claimed that the prices of iron ore (the main raw material for the product concerned) in India are distorted due to the imposition of an export tax on iron ore and the dual freight policy for railway transport with the objective and the effect of subsidising the Indian producers of the product concerned. Such interventions are said to reduce the cost of this raw material in India compared to other markets which are unaffected by the GoI's interventions.

(132)

The complainant added that by intervening on the iron ore market, the GoI is not directly providing iron ore at less than adequate remuneration but is entrusting or directing iron ore mining companies to do so.

(133)

In the complainant's view, all state-owned and privately-owned iron ore mining companies in India are entrusted or directed by the Government to carry out the tasks of providing iron ore for less than adequate remuneration as a part of a strategy to help the iron and steel industry.

(134)

In order to establish the existence of a countervailable subsidy three elements must be present: (a) a financial contribution; (b) a benefit; and (c) specificity (Article 3 of the basic Regulation).

(135)

Article 3(1)(a)(iv), second indent of the basic Regulation states that a financial contribution exists if a government: ‘entrusts or directs a private body to carry out one or more of the type of functions illustrated in points (I), (ii) and (iii) which would normally be vested in the government, and the practice, in no real sense, differs from practices normally followed by governments;’. The type of functions described by Article 3(1)(a)(iii) occurs where ‘a government provides goods or services other than general infrastructure, or purchases goods …’. These provisions mirror Article 1.1(a)(1)(iv) and (iii) of the SCM Agreement and should be interpreted and applied in the light of the relevant WTO case law.

(136)

In the WTO case on export restraints, as a third party the EU offered to the Panel its initial interpretation on these provisions, which had not been interpreted by then (15). After disclosure, several parties referred to these suggestions.

(137)

The panel ruled that the ordinary meanings of the two words ‘entrust’ and ‘direct’ in Article 1.1(a)(1)(iv) of the SCM Agreement require that the action of the government must contain a notion of delegation (in the case of entrustment) or command (in the case of direction) (16). It rejected the US ‘cause-and-effect-argument’ and asked for an explicit and affirmative action of delegation or command (17).

(138)

However, in a subsequent case, the Appellate Body held that the replacement of the words ‘entrusts’ and ‘directs’ by ‘delegation’ and ‘command’ is too rigid as a standard (18). According to the Appellate Body, ‘entrustment’ occurs where a government gives responsibility to a private body and ‘direction’ refers to situations where the government exercises its authority over a private body (19). In both cases, the government uses a private body as proxy to effectuate the financial contribution, and ‘in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement’ (20). At the same time, paragraph (iv) does not allow Members to impose countervailing measures to products ‘whenever the government is merely exercising its general regulatory powers’ (21) or where government intervention ‘may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market’ (22). Rather, entrustment and direction implies ‘a more active role of the government than mere acts of encouragement’ (23).

(139)

It follows that the standard of proof established by the Appellate Body, in particular its finding that ‘in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement’, is less strict than the original EU position advocated in the US — Export Restraints case. The same applies to EU's opinion that a private body would perform the functions which would normally be vested in the government only if the private body is given no choice whatsoever when entrusted or directed by the government, for example when the government fixes the prices at which the private body is obliged to sell.

(140)

Consequently, the EU has adapted its interpretation to the guidance received by the Appellate Body on these matters.

(141)

In line with those WTO rulings, not all government measures capable of conferring benefits rise to the level of a financial contribution under Article 3 of the basic Regulation and Article 1.1(a) of the SCM Agreement. There must be evidence of a government policy or programme to promote the industry under investigation (in this particular case the ductile pipes industry), by exercising authority over or giving responsibility to public or private bodies (here: the iron ore mining companies) to provide iron ore for less than adequate remuneration to the ductile pipes industry.

(142)

In line with the WTO's five-step test (24), the Commission has therefore reviewed very carefully the nature of the government's intervention (Does it involve entrustment or direction of iron ore mining companies?), the nature of the entrusted bodies (Are the mining companies private bodies within the meaning of Article 3(1)(a)(iv) of the basic Regulation?), and the action of the entrusted or directed bodies (Did the entrusted or directed iron ore mining companies provide iron ore to the ductile pipes industry for less than adequate remuneration and hence act as a proxy for the government?). Moreover, the Commission has verified whether the function carried out would normally be vested in the government (Is the provision of iron ore at less than adequate remuneration to producing companies in India a normal government activity?) and whether such function does not, in real sense, differ from the practices normally followed by governments (Does the actual provision of iron ore by mining companies, in real sense, differ from what the government would have done itself?).

(143)

In view of the Appellate Body's conclusions referred to above, the Commission analysed first whether the GoI's support to the ductile pipes industry is effectively an objective of a government policy and not merely a ‘side effect’ of the exercise of general regulatory powers. The investigation examined in particular whether the price distortions found were part of the governments' objectives, or whether the lower prices of iron ore were rather an ‘inadvertent’ by-product of general governmental regulation.

(144)

A number of documents show that the GoI explicitly pursued as a policy objective the support of the ductile pipes industry.

(145)

In 2005 an expert group constituted by the Ministry of steel for formulating guidelines for preferential grant of mining lease, issued a report (the ‘Dang Report’) with a number of relevant findings and recommendations. Already at that time it was noted that ‘… One major competitive advantage for Indian steel, apart from human resources, would appear to lay in assured access to indigenous iron ore supplies at a discount to world prices. This advantage must be preserved, nurtured and fully leveraged’ (25) (emphasis added).

(146)

After disclosure, the GoI and ECL claimed that the Commission relied only on the Dang Report as a legal basis. They quoted a Panel Report where the panel concluded that ‘we are not convinced that the single reference to the Dang Report to the [p]olicy of captive mining leases’ provides support for determining the existence of a Captive Mining of Iron Ore Programme' (26). ECL also submitted that the Dang Report was prepared by an independent expert with no legal value and incapable of setting policy goals for India.

(147)

The Commission first observes that Government's policy objectives are not necessarily contained in legally binding texts. They could be included in a whole range of government documents and policy statements, such as reports, speeches and submissions to the Parliament, declarations, etc.

(148)

Second, the claims put forward by the parties are factually incorrect. As illustrated in recitals 153-169 below, in addition to the Dang Report, the Commission took into account a number of other documents and legal acts in order to conclude that the GoI pursued a policy objective of supporting of the ductile pipes industry.

(149)

Third, concerning their claim on the basis of the Panel Report it is appropriate to quote the entire relevant paragraph 7.211 thereof:

(150)

It is evident from this quote that the panel did not challenge the fact that the Dang Report describes the Indian iron ore industry, and the policies applicable to that industry. Indeed, the members of the expert group (28) were, among others, government and industry representatives and it is reasonable to consider that they are well-informed about the existing government policies and the situation of the industry. In addition, contrary to captive mining, the report is explicit regarding the policy objective of benefiting Indian steel producers (‘assured access to indigenous iron ore supplies at a discount to world prices’) and that this advantage has to be preserved and encouraged.

(151)

In the light of the foregoing, the Commission rejected these claims.

(152)

The GoI took the following two measures to implement the above-mentioned specific policy goal (discouraging exports of iron ore).

(153)

The first measure is the decision taken on 1 March 2007 to impose export taxes on iron ore, initially at a rate of 300 INR per tonne (29) and subsequently changed from time to time. In particular, in March 2011 the rate was increased to 20 % (30), and in December 2011 it was increased to 30 % (31); in April 2015 the export tax on low-grade iron ore (Fe content below 58 %) was reduced to 10 % (32). It should be noted that low-grade iron ore does not have much use in India and therefore there is no need to keep low-grade iron ore available for Indian users of iron ore.

(154)

In general, the support of downstream industries can be a major motivation for imposing export restraints and export taxes in particular. The fact that the major policy objectives of export restrictions (and significant export taxes) is to protect and promote downstream industries by providing domestic downstream industries with cheap raw materials and inputs was also established by the OECD report ‘The Economic Impact of Export Restrictions on Raw Materials’ (33) (‘the OECD report’).

(155)

The second measure is the introduction of a Dual Freight Policy (DFP) by the Ministry of Railways on 22 May 2008 (34). The DFP created a freight charge difference between the transportation of iron ore for domestic consumption and for export. The average difference is threefold (35). The railway freights accounts for a very significant part of the total cost of the iron ore (36).

(156)

Before and after definitive disclosure, ECL claimed that DFP had been abolished in 2009. However, on the basis of the information provided by the GoI and the exporting producer, the Commission established that by means of a number of Rates Circulars issued by the GoI, the GoI continues to apply during and after the IP different freight charges to the transportation of iron ore for domestic consumption and for export to the advantage of domestic consumption (37). In particular, a distance based charge applies to exports, while under certain conditions, domestic consumption is exempted from this charge. Therefore, the Commission rejected the claim.

(157)

These two measures together constitute a targeted export restraint, basically established in 2007/2008 and further expanded in March and December 2011 with the increases in the rate of the export tax on iron ore. The following policy documents show, on the one hand, the existence of a policy objective to support the ductile pipes industry, and, on the other hand, the GoI satisfaction to have achieved its objectives so far:

(158)

The report of the Working Group on Steel Industry for the 12th five-year plan, issued in November 2011 (38) states explicitly that:

(159)

The 12th five-year plan (39) (2012-2017) confirms the policy statements of the report of the Working Group on Steel Industry:

(160)

After disclosure, ECL challenged the Commission's referral to the documents above. First, it argued that the Report of the Working Group on Steel Industry had no legal value as it was just an opinion or assessment of some individuals and it was not Government endorsed document. Second, it stated that the 12th five-year plan was incorrectly quoted as it contained, for example, a recommendation that ‘large scale exports of iron ore have raised serious concerns about the future availability. […] there is an urgent need to address the problems of degradation of the environment, displaced population, transportation bottleneck and so on.’

(161)

On the first argument, the Commission is of the view that, although the Report of the Working Group on Steel Industry is not issued by the Government, it describes the status of the Indian iron ore industry and the Government policy applied to it. Indeed, the working group was composed of, among others, government and industry representatives (40) and it is reasonable to consider that they are well-informed about the existing government policies and the situation of the industry.

(162)

Concerning the second argument, the Commission had never claimed that this five year plan was limited to the policy objectives and recommendations it quoted concerning iron ore. The recommendations the exporting producer is referring to are related to allegations of illegal mining and environmental violations which were an important problem at the time when the report was issued. This was addressed by the numerous court decisions to close mines for instance in the states of Karnataka, Odisha and Goa. The fact that the policy pursues an additional environmental objective does not nullify the primary economic objective. Rather, it is perfectly acceptable that a government policy pursues two objectives at the same time. Consequently, the Commission rejected these claims.

(163)

ECL also submitted that the Planning Commission of India existing since 1950 which formulated the five-year plans was dissolved on 1 January 2015 and that there will no longer be five-year plans.

(164)

From the provided website (41) it appears that the Planning Commission has been indeed dissolved (42). However, a possible expiration of the Five Year Plan after 2017 does not affect the finding that the plan will remain in place until then.

(165)

Finally, ECL quoted another part of the Report of the Working Group on Steel Industry where it was stated that iron ore prices are ‘free from government intervention’ and ‘are determined by […] market forces’; in addition, ‘domestic iron ore prices have generally moved in tandem with the international prices.’ (43)

(166)

The targeted export restraints do not eliminate the market forces altogether on the Indian domestic market but have serious effects with regards to reducing exports and inducing market operators to sell their goods for a lower price than they could obtain in the absence of this policy. This finding does not contradict the assertion made by the report that domestic iron ore prices have generally moved with the international prices. Indeed, exports and imports of India have not been banned altogether. Therefore, it is inevitable that international prices have some impact on Indian domestic prices. This, however, does not mean that domestic prices are at the same or higher level than international prices. Consequently, this claim was rejected.

(167)

By imposing such targeted export restraints (in particular through export taxes and the dual freight policy), the GoI puts Indian iron ore mining companies into an economically irrational situation, which induces them into selling their goods for a lower price than they could obtain in the absence of this policy.

(168)

The GoI took a ‘more active role than mere acts of encouragement’, as required by the Appellate Body (44). The measures taken by the GoI restrict the freedom of action of the iron ore mining companies by limiting in practice their business decision as to where to sell their product and at what price. They are prevented from maximising their income as their proceeds are harshly reduced by those measures.

(169)

The policy statement in the Dang report of 2005 that ‘assured access to indigenous iron ore supplies at a discount to world prices must be preserved, nurtured and fully leveraged’ (see recital 145 above) and the subsequent finding in the 12th five-year plan that ‘Domestic availability of some of these raw materials provides us a competitive advantage’ (45) also show that the GoI expects the iron ore mining companies not to dramatically reduce domestic output but to maintain a stable supply of domestic iron ore. These expectations were fulfilled as the GoI itself observed in the report for the 12th five-year plan cited in the fourth indent in recital 158 as well as in the statements made by the Ministry of Steel referred to in recitals 174 to 176 below. Further, nothing on the record supports the proposition that the GoI permitted iron ore producers to freely adapt their output to the demand as affected by the GoI's targeted export restraints. On the contrary, it is well-known that operating in a free market system it is reasonable to assume that iron ore mining companies would not frustrate significant initial investments and high fixed costs by lowering the production output just in order to avoid oversupply and subsequent downward pressure on domestic prices pursuant to the GoI's measures. Thus, iron ore producers are encouraged by the GoI to maintain production to supply the domestic market even if a rational supplier would adapt its output in a situation where exports have been dis-incentivised.

(170)

Therefore, through those measures the GoI induces the iron ore mining companies to keep the iron ore in India because they cannot sell at better prices which would prevail in India absent these measures.

(171)

In this sense, the input producers are ‘entrusted’ by the government to provide goods to the domestic users of iron ore, i.e. steel manufacturers, including the ductile pipes producers for less than adequate remuneration. The iron ore mining companies are given the responsibility to create an artificial, compartmentalised, low-priced domestic market in India.

(172)

In other words, when applying the target export restraints, the GoI knows how the iron ore producers will respond to the measures and what consequences will result from them. While these producers may lower their domestic production a bit to respond to the export restraint, they would not shut it down or adapt it to a very low level. Rather, as explained in recital 169 in the mining sector the adaptation of their production will remain moderate, which results in lower domestic prices. In this regard, the effects are established on an ex ante, not ex post basis and are therefore not ‘inadvertent’. There is a clear ‘demonstrable link’ between the policy and the conduct of private bodies involved, which are acting as a proxy for the Government to carry out its policy of providing iron ore for less than adequate remuneration to the ductile pipes industry.

(173)

The GoI itself acknowledges the success of its targeted export restraints policy. In 2013 the standing committee on Coal and Steel within the Ministry of Steel issued its thirty-eight report on ‘review of export or iron ore policy’ (46).

(174)

In reply to a question from the committee, the Ministry of Steel informed that ‘although domestic consumption of iron ore by the domestic industries have shown an increasing trend since 2004-2005, the production of iron ore has always been much higher than the domestic consumption, due to export-led production of iron ore in the country. However, to improve availability of iron ore for the domestic iron and steel industry and to conserve iron ore for future long term domestic requirement, fiscal measures have been taken to discourage export of iron ore and presently, export duty at the rate of 30 % ad valorem is levied on all varieties of iron ore (except pellets), which has resulted in significant decrease in exports during 2011-2012 and the current year’ (point 2.7 on page 14).

(175)

The Ministry of Steel submitted highlights of Foreign Trade Policy regarding export of iron ore (point 4.13 on page 23), including:

(176)

The Ministry of Steel also reported to the committee that ‘With the increase in export duty to 20 % ad valorem with effect from 1st March, 2011, the export of iron ore reduced by about 37 % to 61,74 million tonnes during 2011-2012 as compared to 97,66 million tonnes during the year 2010-2011. With further increase of export duty on iron ore to 30 % ad valorem from 30th December, 2011, the export has further reduced. During the first half of the year 2012-2013, the export has declined by more than 50 % to 14,4 million tonnes as compared to 30,75 million tonnes during the same period previous year. Ministry of Steel has been taking up the matter regularly with the Ministry of Finance for levying of appropriate export duty on iron ore in order to discourage its export effectively and to improve availability of iron ore for the domestic iron and steel industry at affordable price’ (point 4.19 on page 26).

(177)

In conclusion, the Commission found that the Government had entrusted the mining companies to carry out its policy to create a compartmentalised domestic market and to provide iron ore to the domestic iron and steel industry for less than adequate remuneration.

(178)

The Commission then assessed whether the iron ore mining companies in India are entrusted by the GoI within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(179)

The two Indian exporting producers were purchasing the overwhelming majority of the iron ore from private undertakings, except for a small quantity of iron ore purchased from the National Mineral Development Corporation (NMDC) which is one of the biggest players on the market and is owned by the GoI.

(180)

Without prejudice to the question whether the GoI exercises meaningful control over the NMDC within the meaning of Article 2(b) of the basic Regulation, which is irrelevant for the purpose of this investigation, the Commission considered that all iron ore mining companies, regardless of whether or not they are publicly owned, are private bodies which were entrusted by the GoI within the meaning of Article 3(1)(a)(iv) of the basic Regulation to provide iron ore for less than adequate remuneration.

(181)

In the next step, the Commission verified whether the iron ore mining companies have actually carried out the above-mentioned governmental policy to provide iron ore for less than adequate remuneration. That necessitated a detailed analysis of the market developments in India against an appropriate benchmark.

(182)

Through the targeted export restraints and other related measures, the GoI induced the mining companies to sell locally at lower prices than otherwise (i.e. absent those measures, the mining companies would have exported the iron ore at higher prices). In contrast, the mining companies did not do so because of the GoI's policy to favour the downstream industry, including the ductile pipes industry.

(183)

The data concerning production, consumption, import and export of iron ore over the years are as follows (47):

(184)

The trends are shown in the graph below: