February , 2020
Government needs to focus on the steel sector
11:43 am

Sitaram Sharma

The global economy is facing severe headwinds;as such the economies of most countries are facing downturns. The global economic growth is projected at about 3%. The situation in India is similar. But there is a slight difference because the Indian government is taking some proactive measures to counter the declining trends in GDP growth and in order to achieve the target of making India a $ 5 trillion economy by 2025.

Steel sector needs hand-holding

The steel industry’s prospects of growth are directly linked to the overall economic development. Therefore, the recent initiative of the Government of India to invest Rs.102 lakh crore in projects under the aegis of the ‘National Infrastructure Pipeline’ in sectors such as roads, urban development, railways and energy over the next five years is expected to augur well for the steel sector. This announcement has come at a time when our core industries including steel have continuously recorded contraction in production over the last few months. Besides, to achieve the five trillion dollar economy by 2025, India needs to spend about Rs.100 lakh crore in infrastructure itself. The announced projects, however, will need some initial governmental support.

It is, however, a matter of pride that amongst various constraints like high power costs and duties imposed on ore exports, our ferro alloys producers have performed well and India’s market size is now equivalent to $ 5.63 billion. The government’s focus to facilitate easy access to raw materials by secondary producers enumerated in the National Steel Policy, 2017 has significantly contributed to this growth of ferro alloys industry. Besides, the formation of a consortium of secondary manufacturers to keep them at par with integrated producers to bid for mines in the ensuing auctions of March, 2020 is also a helpful step. 

The recent price hikes by domestic steel companies including Steel Authority of India Limited (SAIL), supported by improving demand and firming up of global steel prices, are likely to improve producers’  margins in the fourth quarter, which is usually a strong quarter.          

India has recently become the second largest producer of steel in the world. However, our per capita steel consumption at 68 kg which is much below the global average of around 200 kg. The National Steel Policy, 2017 has targeted a per capita consumption of 160-180 kg by the end of this decade. This calls for a massive thrust on generation of demand for steel and on increasing steel-making capacity to 300 million tonne per annum by 2030-31.

The European Union steel industry has taken a policy decision to replace coking coal in the steel making process by hydrogen to develop a carbon-dioxide-free steel production process. The Indian steel industry needs to take similar steps to combat environmental challenges.

India is the second largest producer of stainless steel. However, some special requirements of automobile, aviation and a few other sectors continue to be imported. A major thrust is necessary in production of stainless steels of necessary specifications to substitute such imports. The potential of organised collection of scraps and the recycling thereof with modern technology also needs to be urgently tapped. An organised activity of recycling will be a tremendous boon for the MSMEs. Besides, this activity itself will lead to energy savings.

There is also an urgent need to develop efficient indigenous steel producing technologies since most of the major steel plants are continuing to use imported technologies. The shortage of metallurgical coal also needs to be addressed. The logistical problems of supply of both coal and iron ore also needs to be addressed. Availability of capital and an expedient resolution process for debt ridden steel companies through NCLT is important. Additionally, in order to facilitate restructuring of the existing capacity in terms of technological requirements as per global benchmarks, there is a need to consider tariff protection for the steel industry for some time to come.

The author is the President of the Bharat Chamber of Commerce. The article is based on the Presidential address at 119th Annual General Meeting of Bharat Chamber of Commerce.


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