Steel sector needs support – The Hindu BusinessLine

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Creating a level-playing field and easy finance are vital

Commercial steel production in India has witnessed an upward trend in the decade or so in terms of output. In FY 2020-21, Indian crude steel and finished steel stood at 102.49 million tonnes (mt) and 94.66 mt, respectively, compared with 26.9 mt and 27.6 mt, respectively, in FY 01.

First, revival of the infrastructure segment clubbed with the boost from the government for new infrastructure projects and fast-tracking of incomplete projects has accelerated the pace for the steel sector.

Second, the energy crisis and the resultant production crunch in China is providing more opportunities.

Third, the segment is attracting investments, both in existing plants and greenfield projects. According to CMIE (Centre for Monitoring Indian Economy), between 2014 and 2021, Indian steel companies invested $24.8 billion (₹1.85-lakh crore). The steel industry plans to invest nearly $62.4 billion on capacity expansion in the coming decade, of which, $8.09 billion will be invested over the next three years alone. Experts, too, predict a super cycle for commodities worldwide. The segment is slated to grow at 7 per cent per annum in the medium term. This requires proportionate growth in domestic capacity. Steel companies are employing more workforce to meet the increased demand.

Fourth, armed with state-of-the-art mills, both in public and private sectors, the steel sector is adopting technology in a big way. In a bid to enhance efficiency, business processes and best practices, large steel companies are automating processes to optimise resources and for remote controlling.

Fifth, the steel industry has been at the forefront in the fight against the pandemic. Indian steel companies alone have supplied 2,30,262 tonnes of Liquid Medical Oxygen (LMO) between April and August 2021 often taking a hit on their production. They set up over 10,000 oxygenated beds and provided meals for migrants during the lockdown necessitated because of the pandemic.

However, creating a level-playing field for the international market and imported steel is important for domestic players.

The domestic market has been flooded by exporters with products at dumped prices, or they export products manufactured after availing subsidies. As a result, they do not have to pay full dumping and countervailing duty to the extent of subsidy margins.

Additional costs

Domestic players have to bear 8-10 per cent of embedded levies, duties, and taxes as manufacturing cost, as these are not subsumed in GST. Therefore, domestic steel producers absorb these as an additional cost while exporting. Introducing Remission of Duties and Taxes on Exported Products (RoDTEP) for exports will create a level-playing field against strong competitors from Japan, Korea, and China.

Similarly, costs on logistics, fuel, electricity and financing are higher in India when compared to other steel economies. A NITI Aayog study estimates $80-100 per tonne as an adverse cost for Indian producers. Hence, in order to create a level-playing field, implementation of a corresponding Border Adjustment Tax (BAT) is of utmost necessity.

India also follows the Lesser Duty Rule (LDR) while pursuing anti-dumping measures. Under this, authorities impose duties at a level lower than the margin of dumping if this level is adequate to remove injury. The removal of lesser duty rule will help in checking undisciplined exporters.

Easy access to finance at a reasonable interest rate and conducive compliance requirements will also benefit the industry. The time is ripe to support this industry with a level-playing field.

The writer is Secretary General,

Indian Steel Association

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