India: What is in Store for New Steel Minister ?

The new steel minister Dharmendra Pradhan has his task cut out. Right from reining in the rising trend of imports to ensuring uninterrupted supply of iron ore and bank credit to the industry for capacity addition, the new minister will have a tough time in office, at least in the short to medium term.

With higher imports and significant reduction in exports, India became a net importer of steel in 2018-19 after a gap of three years. Industry captains fear increased dumping of steel from countries like China, Japan and Korea will erode their margins further and if the government does not step in right now, a situation similar to that of 2015 is not far behind.

The industry has already lobbied for enhancing safeguard duty to 25% from around 12.5 to 15% now. It is also vehemently opposing the proposed regional comprehensive economic partnership (RCEP) which will cede space to China. There is also a need to take steel out of the purview of free trade agreements.

On the raw material front, India has to depend primarily on imports to meet its coking coal requirement. Iron ore, abundantly available in the country, is also staring at a scarcity thanks to impending closure of non-captive mines in Odisha and Karnataka. The government needs to transfer seamlessly those operating merchant blocks to the new owner after the leases expire in March next year. Imports of iron ore, now trading at around USD 106/tonne, are not viable for the domestic industry.

A senior steel industry executive said the government needs to initiate talks with banks to ensure liquidity for the sector if it seriously intends to take India’s annual steel manufacturing capacity to 300 MnT by 2030-31 from around 140 MnT now.

This apart, the government also needs to work on creation of infrastructure and ensuring the availability of land for the industry. The new minister will also need to look for innovative options to give a boost to consumption, particularly in the rural market. He also needs to attract international players to come in and set up shop in the country.