Niti Aayog pitches for new steel policy

10 October 2016

With the Indian steel industry facing new challenges, the government’s think tank National Institution for Transforming India (Niti) Aayog has pitched for formulating a new steel policy and a sectoral regulator.

In a working paper titled Need for a new Steel Policy, Niti Aayog member V.K. Saraswat and Ripunjaya Bansal argued that there is a need to examine the entire value chain associated with the steel industry to find out the bottlenecks.

This comes in the backdrop of the National Democratic Alliance government continuing its protectionist measures to support the domestic steel industry including extending the minimum import price (MIP) on 66 steel products by another two months till 4 December. This is being done to save the domestic steel industry from cheap imports, especially from China.

“Seeing the current situation of the steel sector, it may be unlikely to achieve the targets envisaged in the National Steel Policy, 2012, i.e. a capacity of 300 million tonne (MT) and production of 275 MT by 2025. To bring the steel sector back on track, mere tinkerings in the present policy would not bring out a transformational change that is required,” the paper stated.

This comes in the backdrop of the Rs.3.1 trillion debt-laden Indian steel industry reeling under deep financial stress due to a fall in demand and cheap imports from China. This has led to 27% of loans to the industry becoming distressed.

India’s steel industry is valued at around $100 billion and contributes around 2% to the country’s gross domestic product (GDP). India is the world’s third-largest steel producer with 89 MT of production capacity after China (804 MT) and Japan (105.2 MT). The government is projecting a GDP growth of 7-7.75% in the current financial year.

The paper also impressed upon the government’s think tank being the right place to build on the consensus for a new National Steel Policy with the support from different stakeholders comprising various ministries, public sector units, state governments, industry associations and academia.

The paper attributed global overcapacity leading to cheap exports into India. It also advocated the need to increase steel consumption in rural areas, declining competitiveness of manufacturers, intermittent supply of raw materials and problems with land acquisition.

“Country’s per capita steel consumption is 60.3kg whereas the global average hovers around 220kg indicating the potential demand in long term,” the paper said.

Source – HN