Initiatives that create conducive manufacturing environment will help sustain domestic steel sector.

- Alok Sahay

Secretary-General and Executive Head, Indian Steel Association

How do you perceive the opportunities getting better for steel manufacturers as  the Gati Shakti programme aims to ensure speeding up approval processes to enable quicker execution of projects?

We welcome the Gati Shakti National Master Plan by the Hon'ble Prime Minister of India. The idea behind the 'Gati Shakti' scheme is that the Government is aiming to create a digital platform promising the “integrated planning and coordinated execution” by sixteen ministries. Each ministry and Government department will be able to access information about the ongoing and upcoming projects for a balanced and synchronised approach. It will bring together under one ambit the Government Ministries like Railways, Roads Transport and Highways, Shipping and many more. Geo-Satellite imagery and associated data, land, and logistics plans would be realised efficiently on the ground.

For instance, it has been seen on multiple occasions that when a road is constructed, other agencies dig up the constructed road again for other activities like laying down the underground telephone lines, gas pipeline, etc. Thus, this master plan aims to resolve the infrastructural issues, India has been suffering from for many decades. The idea is to reduce the lack of coordination between various departments to reduce the inconvenience caused to the common man in the country. This plan will help a coordinated infrastructure growth, avoiding wasteful expenditure and efficient utilization of public money.

It will also be the continuous driver for increased consumption of steel within the country as construction and infrastructure sectors are major consumers of steel.

The PM Gati Shakti National Master Plan also aims for bolstering multi-modal connectivity. The opportunities for steel, therefore, arise from the consumption of steel in these multi-modal projects. The Ministry of Ports, Shipping, and Waterways have identified 101 projects for implementation by 2024-25. The identified projects are in addition to the 80-odd Sagarmala projects that are underway and include many waterways. New ports could relieve the pressure on existing major ports and make logistical costs more competitive. Streamlined approval processes will also help in the quicker execution of National Highway projects. National Highways constitute only 2% of the total road length in the country but carry 40% of the total traffic. The National Highways Development Programme (NHDP) aimed at the fast-track building of national highways approximately 70,000 km pan-India, has already completed 48,000 km and the balance is under implementation and order placement.

What according to you would be the bottlenecks for manufacturers; in terms of market dynamics, international developments putting pressure on prices, capacity utilisation, technology adoption etc?

At this critical juncture post the Covid-19 pandemic, Government initiatives that create a conducive manufacturing environment will help sustain domestic manufacturing including steel. The important bottlenecks include stable and consistent policies, major raw material security, availability of raw materials not available domestically - at reasonable prices, for which imports need to be allowed at nil customs duty.  Easy access to finance at a reasonable interest rate and conducive compliance requirements will also benefit the industry. Steel has been at the forefront of infrastructure and socio-economic development, it's not just only an enabler in India's growth story but has laid the foundation for that growth story. The green economy has become very important post-COP26 UNCC summit at Glasgow. The important aspects which will put pressure on the bottom lines will be based on the Trade Défense Instruments; Increasing regulatory push at home markets; Carbon regulation and border measures on exports markets to a green economy; Specific entry requirements for import; Development of new green technologies (hydrogen); Implementation of the climate projects to offset companies' emission levels. These aspects need the focus of the Government.

However, the manufacturing in the steel sector is attracting investments in both- brownfield greenfield projects. The sector has been consistently investing in the economy even when no one else would.  According to CMIE (Centre for Monitoring Indian Economy) data, between 2014 and 2021, Indian steel companies invested US$ 24.8 billion (1.85 lakh crore rupees). The Steel Industry plans to invest nearly US$62.4 billion on capacity expansion in the coming decade, of which US$ 8.09 billion will be invested over the next three years alone. Experts too predict a super cycle for commodities worldwide. The segment is slated to grow at 7 percent per annum in the medium term. This requires proportionate growth in domestic capacity. Steel companies are employing more workforce to meet the increased demand.

How do you see initiatives like Make in India, PLI scheme etc, further accelerating the growth of the steel industry?

Steel manufacturers have always been the champions of Make in India and self-reliance.  PLI scheme is a way forward making India Atmanirbhar in speciality steel. The capital outlay of Rs 6322 for incentivisation of investment in the manufacture of specialty steel by creating an additional capacity of 24.6 million tonnes with the next 7-8 years will definitely accelerate growth. The Ministry of Steel supported by the Empowered Group of Secretaries (EGOS) is also trying to make the scheme more investor-friendly and attractive by notifying liberal guidelines keeping the main objective of domestic capacity building in speciality steel in perspective. 

Can you elaborate or provide suggestions that need to be incorporated by the government to ensure not just the success of the programme but also growth for material manufacturers? Also, share your forecast on the growth.

As regards material manufacturing, the steel industry always supports downstream Industry to meet the increasing and growing steel demand in the Country. Steel Industry plans to invest nearly USD62.4 billion on capacity expansion in the coming decade, of which USD 8.09 billion will be invested over the next three years alone as already stated. Experts too predict a super cycle for commodities worldwide. The segment is slated to grow at 7 percent per annum in the medium term. This requires proportionate growth in domestic capacity. This capacity building will also result in new avenues for employment generation.

However, for the confidence-building of investors, a level playing field is a must in order to sustain the growth of the steel industry and ensure continued investments into the sector. 

While on the one hand, the domestic players are required to invest to fulfil the vision of the Government of setting up of additional steel capacity of 158 million tonnes by 2030-31 from the current level of 142 million tonnes to take the total capacity to 300 million tonnes, on the other hand, the domestic market gets dumped steel imports. These dumped products are exported to India at subsidised rates without being charged any countervailing duty. Around 8-10 percent of the cost of steel are levies, duties, and taxes. Since these are not subsumed in GST, steel producers absorb them as an additional cost while exporting. Introducing RoDTEP for Steel exports from India will create a level playing field against global players like Japan, Korea, and China having huge excess steel capacities in comparison to their domestic demands.   Exports from these three countries into India constitute about 70-75 percent of India's imports till April 2021.

Similarly, costs for logistics, fuel, electricity, and financing are higher in India as compared to other steel economies. A NITI Aayog study estimates almost USD 80 to USD 100 per tonne as an adverse cost for Indian producers. Hence, to create a level-playing field, a corresponding Border Adjustment Tax (BAT) is of utmost necessity.

India also follows the lesser-duty rule while pursuing anti-dumping measures. Under a lesser-duty rule, authorities impose duties at a level lower than the margin of dumping if this level is adequate to remove injury. While the lesser duty rule was meant to protect the interest of users when domestic steel availability way back in the year 1999 was very low, the method in which the rule is implemented now hurts domestic producers defeating its very purpose. The removal of lesser-duty rule will bring ease in checking undisciplined exporters from the global community for dumped imports into India.

Thus, Government initiatives that create a conducive manufacturing environment will help sustain domestic manufacturing including the steel sector.

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