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 India's steel ministry favours a temporary tax to curb rising steel imports, a senior official with direct knowledge of the matter said, as it seeks to protect steelmakers reeling from a surge in cheaper Chinese imports.

A temporary "safeguard duty" would help curb Chinese imports, and a process to impose the duty would start soon, said the official, who requested anonymity as the deliberations are not public.

India, the world's second-biggest crude steel producer, became a net importer of the alloy in the fiscal year to March 31, 2024, and the trend has continued since then, with imports from China rising steadily.

India's finished steel imports from China, the world's biggest steel producer, reached a seven-year high during April-August.

Prime Minister Narendra Modi's government has so far resisted calls to curb imports from China, partly to ensure sufficient supplies to meet strong demand in the world's fastest-growing major economy.

But the authorities now believe the government needs to impose curbs to avoid a crash in local prices and any major financial harm to steel producers, the official said.

India's top steel producers such as JSW Steel, Tata Steel and ArcelorMittal Nippon Steel India have raised concerns about cheaper steel imports from China.

Rapid economic growth and higher infrastructure spending have turned India into the world's biggest steel consumer as demand tapers in Europe and the United States.

Indian steel companies need to be financially healthy to invest and boost capacity to meet future demand, the official said.

India's steel ministry did not respond to a Reuters email seeking comment.

Ruling out the option of raising basic import or customs duty, the official said the move would not cover two-thirds of India's overall steel imports from Japan and South Korea because of New Delhi's free trade agreements with Tokyo and Seoul. And he ruled out anti-dumping investigations against China because they would take about one to two years.

"The quickest, effective way is a safeguard duty," the official said. A safeguard duty is a temporary tariff to protect local industries from cheaper imports.

The steel industry will write to the commerce ministry and safeguard measures could be in place in four to six months, he said. India would also tweak its quality standards to curb Chinese steel imports, the official said.

China has a lot of surplus steel capacity. Beijing's crude steel output in September slid for a fourth consecutive month. Separately, the official said the steel ministry has rejected an industry request to curb exports of low-grade iron ore, a key steelmaking ingredient, citing adequate stocks.