The story so far: In a provisional ruling on June 14, the European Commission’s Directorate General for Trade imposed anti-dumping duty on Indian optical fibre cable manufacturers. The actions were taken following an investigation which commenced in November 2023. A month before, the industry-representative body Europacable had complained about dumping from India causing injury to the European industry.
What led to the provisional actions?
Optical fibre cables are a pivotal commodity for facilitating telecommunications and broadband coverage.
Representing the industry union of optical fibre cable (manufacturers), Europacable in October 2023 observed that imports of single-mode optical fibre (SMOF) cables from India had increased both in absolute terms and market share. These lower-priced imports, the complainant said, had a negative impact on the quantities sold, the level of prices charged and on the market-share held by European manufacturers. Europacable said that the situation resulted in “substantial adverse effects on the overall performance and the financial situation” of the industry.
The allegations were based on a comparison of the domestic prices with the export prices (ex-factory pricing) of the products when sold for export to the Union. The complainant said that the dumping margins calculated on this basis are “significant for the country concerned (India).”
Thereafter, in November the same year, the Commission found “sufficient evidence to justify the initiation of a proceeding.” The investigation scrutinised the allegations about dumping and injury between October 1, 2022, to September 30 the next year.
What is the anti-dumping duty levied?
Anti-dumping duties have been provisionally levied in the range of 8.7% of 11.4% on Indian cable manufacturers. Birla Cable, Universal Cable and Vindhya Telelinks will face an anti-dumping duty of 8.7%. Polycab India, ZTT India, Aberdare Technologies, Apar Industries, UM Cables and Aksh Optifibre would be encountering an anti-dumping duty of 9.9%. Sterlite Technologies and Sterlite Tech Cables Solutions face a duty of 11.4%.
However, these are provisional measures, and companies have access to legal recourse.
HFCL emerged as the only Indian manufacturer to have been exempted from the provisional anti-dumping duty, a fact further corroborated by its communications with stock exchanges. “HFCL’s products have been preferred by European telecom operators, as they meet the quality, reliability and safety standards, are commercially viable, and guarantee a sustainable supply for the construction of Europe’s telecom infrastructure,” its statement read. It also mentioned having “long-term engagements” with some of the region’s leading telecom operators and ISPs.
Is this a first?
No. The European Commission had earlier imposed an anti-dumping duty on Chinese manufacturers, back in November 2021. Europacable was the complainant here as well. The action followed an investigation that observed Chinese producers were benefitting from multiple government subsidies including funds to spur innovation along with research and development. They were also granted preferential tax rates as a high-tech industry. The investigation also concluded that Chinese manufacturers benefit from the state-funded China Development Bank Fund, whose purpose is to support projects in key strategic sectors set out by the Chinese government.
The Chinese manufacturers were deemed to be guilty of “unfair competition” that was “injurious to the EU industry.” Duties were imposed on these concerns in the range of 5.1% to 10.3%.
However, this did not mark the end of the tale. The Commission further tightened the anti-dumping duty after it found Chinese companies deliberately decreasing the prices of their exports to ‘absorb’ the impact of their earlier actions. They were now slapped with new anti-dumping duties ranging from 39.4% to 88%, which the Commission deemed to be the maximum increase allowed.
What can we say about the trade and business dynamics?
As per data from the World Bank’s World Trade Integrated Solution, China was the biggest import partner (to the EU) for optical fibre cables in 2023. This was followed by India, U.S., Morocco and U.K. Globally, the top exporters of the commodity were China, U.S., EU, Mexico and Hong Kong — in that order. Considering India’s placement in this ecosystem, the anti-dumping duties could potentially translate to cost implications for European consumers.
Back in 2021 when the Commission acted against China, it said that with the demand for cables expected to increase, the measures would ensure distributors have a larger competing market. “This is an opportunity for them to keep and develop their business even if their prices increase due to the anti-dumping duties,” it noted. These dynamics, however, could not be realised because China undercut prices further. Back then, concerns also emanated about importers being able to switch suppliers in a relatively short time— it would be “costly” and “time consuming.” The Commission, however, derived confidence from the array of importing countries and earlier resilience to find new suppliers during the 2017-18 shortage.
Also crucial to note in the ‘dumping’ context and the investigation period: as captured in the Ministry of Commerce’s Import-Export data bank, India’s exports (in terms of value) of optical fiber cables declined 11.21% to $47.8 million in FY 2023-24. In fact, in May last year, India’s Directorate General of Trade Remedies (DGTR) had also initiated an anti-dumping investigation scrutinising China, Indonesia and South Korea. The investigation observed that because of an increase in the volume of low-priced dumped goods, the domestic industry has not been able to sell the article in significant quantities in the domestic market. This has translated into an inventory pile-up.
Separately, the investigation also observed that the dumped imports’ impact on the selling price of the domestic industry has led to a “significant loss, decline in cash profit and a significant reduction in the return on capital employed.” While it was found that there was an increase in the production as well as capacity (for domestic industry), the fruits could not be utilised fully because of the dumping. It was noted that the complainant was able to maintain their sales and market share by selling articles at a loss. The considerable growth in demand was subsumed by dumped imports – further translating also to a decline in the domestic industry’s market share.
For perspective— Minister of State for Communication Devusinh Chauhan in a response to a question in the Lok Sabha (August 2023), informed that the existing capacity of the domestic industry was 100 million fiber km, relying on data from industry associations. He added that the market size was approximately Rs 7,000 crore (in 2019) with a CAGR of 6.8%. Mr Chauhan also told the Lower House that domestic investments in the optical fibre industry was approximately Rs 5,000 crores while foreign investments scaled about Rs 600 crore in the last 10 years.
