INSUBCONTINENT EXCLUSIVE:
The infrastructure segment is the largest steel user, and the Indian government's focus has fuelled steel consumption even as international
markets have underperformed
(Photo: Bloomberg)3 min read Last Updated : Jul 09 2024 | 8:59 AM IST
India's leading steel companies hope the Modi 3.0 Budget will
continue the massive capital expenditure currently underway, focusing on infrastructure development, manufacturing, and fair trade.
The
infrastructure segment is the largest steel user, and the Indian government's focus has fuelled steel consumption even as international
markets have underperformed.
According to provisional statistics, steel consumption grew 13.6 per cent in FY24, reaching 136 million
tonnes (mt), according to a CRISIL report
The upward trend was supported by 'strong' finished steel production, which increased 12.7 per cent year-on-year, reaching 139 mt, the
report said.
It is hardly a surprise that steelmakers are pinning hopes that the government remains steadfast on infrastructure
spending.
T V Narendran, managing director and chief executive officer, Tata Steel, expects the government to continue investing in
infrastructure and keep addressing the cost and ease of doing business.
Jayant Acharya, joint managing director and chief executive
officer of JSW Steel, explained that infrastructure capital expenditure has a direct multiplier effect on the country's economic output
"We expect the government to continue with its focus on infrastructure spending."
As the supply side is being increased, measures to
improve consumption would be a welcome step, he added.
A focus on manufacturing is another big ask from the sector.
Apart from doubling
down on infrastructure spending, Ranjan Dhar, director and vice president of sales and marketing, ArcelorMittal Nippon Steel India (AM/NS
India), said, "We need to do massive heavy lifting on the manufacturing side."
JSW Steel's Acharya called for the extension of the
concessional income tax rate of 15 per cent to promote manufacturing in the country and smoother transmission benefits under the
production-linked incentive scheme to boost 'Make in India'.
The Indian government has set a target of achieving a 300 mt steel capacity
by FY31, and companies have aligned their expansion plans accordingly
But a surge in imports has been impacting prices.
AM/NS India's Dhar pointed out, "Indian steelmakers are putting in a huge amount of
If margins go down, then investors and bankers will squeeze investment, which will delay the capital expenditure
The industry must be protected from injury."
The basic customs duty on steel should be raised from 7.5 per cent to 12.5 per cent, he
said.
The views are echoed by JSW Steel's Acharya
"India needs to implement appropriate trade measures in the wake of external volatility and diversion of material, including steel, into the
country."
India turned a net importer of steel in FY24
The overall steel trade deficit was 1.1 mt in FY24, marking a shift in status from a net exporter since financial year 2017, the CRISIL
report mentioned.
According to the Indian Steel Association, the apex body of steel producers, there should be a level playing
field.
"The government should have stricter product-specific rules of origin for steel in the form of 'melt and pour' to arrest predatory
steel imports from China rerouted through Vietnam under the India-Asean free trade agreement," said Alok Sahay, secretary general of the
association.
Sahay also said that India has a natural advantage in iron ore and that double taxation on the raw material should be
corrected to make it cheaper.
As companies step up capacity, they are also trying to keep the carbon footprint in check.
Sahay said the
industry was awaiting policies to incentivise investments in decarbonisation and demand generation for low-carbon emission steel
"Use of low-carbon steel in government projects can become a starting point for demand generation."First Published: Jul 09 2024 | 8:59 AMIST
