UPSC Express

About Steel sector

• In 2016-17, India’s total ‘Finished Steel Production’ for sale was around 100 MT with an apparent consumption of about 85 MT. Thus production of finished steel was sufficient to meet its present demand in the country and also for exports.

• The domestic steel sector contributes around 2% of the country’s GDP and employs over 6 lakh people.

• As per The World Steel Association (worldsteel) report-2017, India ranked third with 95.6 Million Tonnes (MT) in world total steel production of 1630 MT. China with 808 MT and Japan with 105 MT are ahead of India.

• India has very low per capita steel consumption i.e. 65 kg, (US-750; China-400+; World-216), hence steel sector has huge potential.

Concerns:

• Over the last few years, the Steel sector has been adversely impacted by the global steel glut which resulted in predatory pricing and a surge in steel imports into the country.

• Because of which, various projects failed and steel sector accounts for almost 30% of the non-performing assets of the banking industry.

• However, on account of timely intervention by the Government and industry through various trade related measures like anti-dumping and safeguards as well as other policy initiatives, the impact of the global glut were significantly mitigated.

Government Initiatives for Steel sector

• Steel being a de-regulated sector, the role of Government is that of a facilitator only.

• Government lays down the policy guidelines and establishes the institutional mechanism/structure for creating conducive environment for improving efficiency and performance of the steel sector.

• The Government has been proactive in ensuring adequate raw material availability at reasonable prices and explored ways of reducing input, logistic and infrastructure cost of Steel production.

• In order to provide level playing field to domestic steel sector, Government has taken various measures which are as under:

• In 2015, an Anti-Dumping Duty and a provisional safeguard duty was levied on imports of certain variety of products.

• In 2016, Government imposed Minimum Import Price (MIP) on many steel products. Government hiked import duty on various finished and semi-finished steel products.

• This year too, the government safeguarded the interests of domestic players by imposing a 4% additional dumping duty and a 1% countervailing duty.

• The Government has released the National Steel Policy 2017, which has laid down the broad roadmap for encouraging long-term growth for the Indian steel industry.

The National Steel Policy 2017 

• Policy was rolled out to enable the domestic steel industry to reach a capacity of 300 million tonnes (mt) by 2030-31 (against 126 mt now) through concept of Special Purpose Vehicle(SPV)  while setting global benchmarks in terms of quality and technology.

• The policy on preference to Domestically Manufactured Iron and Steel Products aims at facilitating consumption of domestic value-added steel in government procurement in sectors such as oil & gas, shipping, ports and airports.

• The policy mandates value addition of 15% on imported steel to qualify for bidding in government projects.

• Four mineral rich states namely Chhattisgarh, Odisha, Karnataka and Jharkhand have been identified for setting up of Integrated Steel Plants with the collaboration of Central and State PSUs through SPV route.

Steel sector: Year-2017

• The commencement of a long overdue restructuring of the Indian steel industry may be seen as one of the sectoral milestones of 2017.

• The year also saw two policy interventions by the government:

• aimed at boosting domestic production and

• consumption of value-added steel in government projects.

• Several steel companies, including some promoted by big corporate houses, were referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code.

• These happened at a time when the domestic industry regained its fundamentals amid strong export demand and a revival of the domestic market.

• Benefits:

• Increase in production: Production of finished steel grew by 8.5% over previous financial year whereas consumption grew by 2.6% in 2016-17.

• Higher margins: In financial performance, steel firms have started realising higher operating margins on the back of improved domestic and international steel prices.

• Domestic factor: Domestic prices improved significantly during the year. Value addition and increased branding saw a thrust from all major firm.

• Increase in export: Exports amounted to 8.9 million tonnes in the first 10 months of calendar 2017, against imports of 6.6 million tonnes of finished steel. Indian exporters got a bigger export market at a time when overall sentiment was good. India was net exporter of steel in 2016-17.

• Improvement in quality: Indian steelmakers also became more competitive during the year on grounds of quality and their deliveries. Many manufacturers harnessed advanced technology to augment quality.