As a result, the Indian steel industry has asked the Indian government to put in so-called safeguard duties of as much as 25 percent to protect it from growing imports. These would be imposed on steel that the government determines has been dumped in India at prices below the cost of production.

Since last year, China and the United States have been locked in a trade conflict as Washington seeks to fix the trade balance, currently tilted in favour of Beijing. The two nations have raised or threatened to raise tariffs on each other's goods, moves that could re-draw trade flows and that have threatened to derail the global economy.

"China has excess (steel) capacity and there is a concern they could re-route it through other countries like Vietnam and Cambodia into India," an Indian government source with direct knowledge of the matter said.

"Steel sector is vulnerable," the source said, declining to be identified due to the sensitive nature of discussions.

India, the world's second-largest steel producer, turned net importer in the year ended March 31, 2019 after a gap of three years. That is because the country lacks the capability to produce high-quality steel and has lost some of its global clients to cheaper exports from China, Japan and South Korea.

"China, Japan, Korea which are major exporters to U.S., Europe and Canada, because of trade actions, they are also diverting steel into India," Seshagiri Rao, joint managing director at JSW Steel Ltd, told Reuters.

Demanded safeguard duties 

"It is very much essential for government of India to increase the safeguard duty to 25 percent as soon as possible," said Rao. Currently, there are a range of such duty levels.

Last month, steel companies JSW, Steel Authority of India , Tata Steel, Jindal Steel and Power - controlling over 45 percent of India's total steel production - met with government officials to ask for safeguards, according to a source who attended the meeting.

During the meeting, Steel Secretary Binoy Kumar, the top bureaucrat in the Ministry of Steel, also said that the steel industry was at risk from global excess capacity, the source said.

Kumar said India need to act soon to protect its fragile steel industry from predatory imports as it would be difficult to revive it if the situation was allowed to deteriorate for three-to-four years. However, he said a decision on safeguard duties has not yet been taken.

The steel ministry did not respond to Reuters' emails and phone calls seeking comments. Neither did SAIL, Tata and JSPL.

"What we are seeing is that part of displaced exports is already making inroads," said Arnab Kumar Hazra, assistant secretary general at the Indian Steel Association, which represents major steel producers. There was therefore every reason to argue for safeguard duties given the perceived threat, he said.

India had imposed a slew of safeguards in 2015-2017 on several steel products to curb cheaper imports and protect local industry, prompting Japan to refer India's behaviour to the World Trade Organization (WTO) dispute panel.

India's trade deficit with China jumped more than a nine fold over the past decade to $63.05 billion in the year ending March 2018.

With the latest U.S. tariffs on Chinese goods, India fears Beijing could also re-route exports of electronic items, toys, furniture and organic chemicals to India through other Southeast Asian nations.

New Delhi and Beijing have been negotiating over greater market access as China wants to exports milk products and apples to India while New Delhi wants to sell China bovine meat, sources said.