It is welcome that several stressed steel assets are nearing resolution under the Insolvency and Bankruptcy Code. It would recapitalise and transform the industry. Companies with about 22 million tonnes of steel capacity — a fifth of domestic capacity — are in the insolvency process, the successful resolution of which would reduce by over half the steel sector’s total outstanding debt of .`3.26 lakh crore.
Just as important, it would lead to consolidation in the valueadded flat steel segment, and shore up domestic expertise including possibly from global steel majors. There is also solid capacity addition by the main domestic producers in the works. Reports say that the National Company Law Tribunal has cleared the decks for Tata Steel’s acquisition of Bhushan Steel, while industry leader JSW Steel’s bid for Monnet Ispat has been okayed by the Competition Commission of India. Meanwhile, Arcelor-Mittal, the world’s largest steel producer, is in the fray for Essar Steel, and mining and non-ferrous major Vedanta has taken over Electrosteel, with brownfield expansion in the pipeline.
There’s much potential to double and even treble domestic steel capacity to meet rising demand for infrastructure, built spaces, automobiles and white goods. The way forward is for domestic producers to innovatively cater to demanding custom.
Abroad, new grades and specifications are quite routine in the steel industry, and many of the steels in production were not even manufactured a decade or so ago. We need innovative steel clusters, and the ongoing consolidation here has the potential to revolutionise the industry in a manner that our early planners, who mandated what now seems quaint, uneconomic steel plants behind absurdly high tariff walls, might not have visualised.
This piece appeared as an editorial opinion in the print edition of The Economic Times.
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