Sector Reform

National Steel Policy, 2017, gives impetus to industry

The global steel industry is currently characterised by excess capacity, a challenge that continues to plague the sector. This has had a bearing on international steel prices and the profitability of steel producers, and has created trade distortions. In light of these challenges, G20 leaders, in November 2017, came to an agreement to tackle the situation of overcapacity. In this context, countries are taking measures to downsize their steel production. There was pressure on India to do the same. However, being one of the fastest growing economies of the world, India asked to be allowed to maintain a steady increase in steel production despite global pressures of cutting steel output, and was therefore allowed to stick to the 300 million tonne (mt) production target as laid down in the National Steel Policy, 2017. India needs to ramp up its per capita steel consumption which is at a low of 61 kg per tonne, significantly less than the international benchmark of 208 kg per tonne.

Another major development that took place during the year was the setting up of the Steel Research and Technology Mission of India (SRTMI). This development comes against the backdrop of the Ministry of Steel expressing displeasure over public sector units not developing an appetite for specialised steel production despite India being the world’s third largest producer of the metal. The SRTMI is likely to enhance investments in research and development in the industry to international levels. All major institutions related to steel research in the country could be brought under the ambit of the SRTMI, which will also help the secondary steel sector use green technology for manufacturing products.

Objectives of the National Steel Policy, 2017

Crude steel production capacity currently stands at 122 mt, and is targeted to increase to 300 mt by 2030. Steel production is expected to increase by 200 mt in 2017-18. The per capita consumption is also expected to touch 68 kg per tonne by the end of this fiscal year. This incremental demand is expected to come mostly from the infrastructure sector, including the roads and bridges, railways, construction, defence and housing sectors. So far, the use of steel in railways is limited to railway tracks, rolling stock, wagons, platforms and coaches; however, efforts will now be made to increase steel use in making wheels, railway stations and foot overbridges. Further, the Ministry of Steel is also considering exporting forged wheels. In the highways sector, slag produced by steel manufacturers could be used for laying roads.

The government’s Housing for All scheme provides a huge opportunity for the use of steel-intensive structures and designs, the use of prefabricated and precast steel structures, etc. Hence, the ministry will take the necessary measures to promote greater use of such structures/designs under the scheme.

The centre’s port-led development programme, Sagarmala can help bring about significant savings in the domestic steel sector by using the coastal shipping route for the transportation of goods and raw materials. Traditionally, steel plants in India have been set up near the raw material source. However, a robust coastal shipping network not only offers logistics cost saving, but also flexibility in sourcing raw materials as well as better linkages with global markets. Therefore, under the National Steel Policy, 2017, the transportation of raw materials and finished goods through inland waterways and coastal shipping will also be promoted so that the burden on rail and road transport is reduced. In this regard, Rashtriya Ispat Nigam Limited’s maiden coastal steel shipment was flagged off in November 2017 from Visakhapatnam port. The project to haul 0.22 mt of products of the Visakhapatnam Steel Plant to Ahmedabad, Kochi and Mumbai was executed by a private consortium. To encourage export opportunities and remain competitive, the government is contemplating port-led development of steel clusters under the aegis of Sagarmala. The establishment of coast-based steel plants will also be undertaken in conjunction with the Ministry of Shipping.

The Ministry of Steel is continuing its role as a facilitator, especially as the steel industry has a multiplier effect of 1.4 and 6.8 on GDP and employment respectively. Steel needs to be increasingly used for construction as it offers the advantage of faster erection and greater durability. While evaluating projects, emphasis should be on lower life cycle costs rather than looking at upfront costs in isolation.

In the past, substandard products have been dumped in the country. To check this, quality control orders on 37 products have been introduced with many more being contemplated by the Bureau of Indian Standards. This will  domestic steel producers to manufacture high quality steel products. India should focus on manufacturing high quality steel especially as the quality of manufactured steel is coming under scrutiny on a global level.

The ministry will also provide the necessary policy environment to promote gas-based steel plants, electric steel-making, auxiliary fuel injection in blast furnaces and other technologies which will bring down the use of coking coal in steel production. Efforts will also be made to facilitate alternative routes for steel-making, using indigenous coal with an increased focus on improving energy efficiency and reducing greenhouse gas emissions.

The Ministry of Steel is actively intervening for the aggregation and beneficiation of ore fines, which was not done earlier. It is also scouting around for international sources of raw materials. It will extend support to companies for identifying such sources. Scrap recycling as an input to the steel industry needs greater emphasis. Besides, the ministry is also looking at setting up joint ventures with forward and backward linkages for steel manufacturers.

Recent steps

  • The Ministry of Steel has held discussions with municipal authorities to shift to steel pipelines, thereby facilitating the manufacturing of high-end steel.
  • In this regard, it has requested the Ministry of Finance to reduce prices of ferronickel which will eventually lead to a decline in the prices of steel pipelines.
  • Further, it has held talks with GAIL (India) Limited and the Oil and Natural Gas Corporation to use stainless steel pipes, which are corrosion resistant, as an alternative to the pipes being used at present.
  • The Ministry of Steel has held discussions with the Ministry of Shipping to develop 12 new ports using steel.

Therefore, expanding the scope of steel use to new areas such as port development, pipeline construction, etc., will stimulate demand for the metal, which will ramp up per capita steel consumption. The airport sector will also be a major contributor as the country aims to set up 100 airports in the next 15 years.

Conclusion

The government has taken proactive measures to promote the growth of the steel industry. The levy of the anti-dumping duty has resulted in a turnaround of the sector. Further, the imposition of a countervailing duty on imports of stainless steel flat products will provide a level playing field to the industry and enable it to grow to its full potential.

With the introduction of the DMI&SP (domestically manufactured iron & steel products) Policy in government procurement in 2017, the domestic manufacturing of iron and steel products is being encouraged to reduce the dependence on imported steel. High-end steel, such as automotive steel and alloy steel, which is currently imported, should be indigenously produced either under the guidance of the SRTMI or by importing the required technology.

The steel industry is poised for growth as it is witnessing a cyclical upturn with domestic consumption picking up. Although the sector has accounted for a sizeable share of banks’ non-performing assets, steel firms will undertake investment in ramping up capacity to meet the 300 mt production target. The government has been spearheading the push towards increasing steel production capacity, with existing steel mills being upgraded and state-owned companies building new steel plants.

While the steel demand growth in the past few quarters is indicative of a modest expansionary trend, the durability and strength of the growth are yet to be established. Since India’s economic growth is contingent upon the growth of the Indian steel industry, it will be crucial to see if this growth is sustained in the long term. w

Based on remarks by Ruchika Chaudhry Govil, Joint Secretary, Ministry of Steel, at a recent India Infrastructure conference.

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