India is witnessing the revival of steel demand amidst the fading blues of the coronavirus crisis and the gradual revival of the Indian economy which is paving the path of an Atmanirbhar Bharat. Recently, the Honourable Prime Minister announced a series of reforms, including the INR 1-lakh-crore Agriculture Infrastructure Fund to boost the foundation of the Indian economy.
The one nation-one mandi concept is unique. The government should also bring in a similar idea to revive the ailing power sector. One nation- one-tariff will change the discourse and destiny of the Indian power sector for good. The government has announced several reforms in other core sectors as well. The five-month-long uncertainty is disappearing slowly and we are hopeful that before the Diwali season comes upon us, the entire economy will showcase the positive effects of the recovery at large. JSPL, as one of the leading steel manufacturers of India, is committed to re-shaping the economy in line with the vision of a self-reliant India under the dynamic leadership of the Honourable Prime Minister, Narendra Modi.
The steel ministry has expressed the intent of the government through the projection of a target of 300 million tonnes (MnT) of steel-making capacity by 2030. We will be playing a significant role to achieve this target. As per the Survey tabled by Finance Minister Nirmala Sitharaman in Parliament, India’s crude steel production in 2018-19 stood at 106.56 MnT, a growth 3.3% over 103.13 MnT recorded in 2017-18. The 300 MnT steel production target may not look realistic in the present-day scenario, but it is very much achievable down the line in the coming years.
Investment To Create 300-MnT Capacity
India has the potential to transform into a manufacturing hub as China did in the past two decades. However, it is a gradual process and we have enough time till 2030 to become a 300 MnT tonnes steel manufacturer. Swift implementation of the policy reforms and big infrastructure push can make it possible. We need to develop more highways, rail networks, bridges, smart cities and indigenous Defence equipment manufacturing facilities. There are a lot of opportunities lying in India’s rural infrastructure sector. All these projects would be completed through steel as a major component. To match the need for emerging markets, India has to invite more players into the market. If you see the pattern, no greenfield project has come up in the past 6-7 years. Why? Only five major private sector companies are producing steel to fulfill the infrastructure needs of the country. If India wants to be a 300-MnT steel producer annually, then a special steel capex fund should be established. This will increase the crude steel output and would help regulate the commodity’s prices as well. This approach will not only revive the ailing sectors but also stimulate endless employment opportunities.
Competitiveness Of Indian Steel Industry
Indian steel producers are the lowest-cost steel producers in the world at factory-gate, but the competitiveness erodes at customer gate level. The steel industry is suffering due to a multiple tax system. These taxes include electricity duties, GST compensation cess on coal, royalties on iron ore, coal and other raw materials etc. Some of these are non-GST compliant and hence become a cost to the manufacturer. There is no input credit available for steel players. These taxes make up around 12% of the total price of steel. In overseas markets, these taxes either do not exist or are substantially lower. The government should fix this issue to improve the competitiveness of the steel industry.
Mass Migration & Job Creation
Around 60 lakh people have migrated to the four states of India during the ongoing chaos and uncertainty created by the pandemic. Big infrastructure push will ensure employment to these migrants and will curtail the mass migration spree. The entire real estate sector needs a thumbs-up from the government to complete the stalled projects, and ready-to-use steel structures could be a viable option. Swift implementation of some of the existing policies in the Defence sector will also be a win-win situation.
Coal Sector Reforms
We have enough raw material reserves within the country to achieve the 300 MnT target projected by the steel ministry. With the announcement of recent reforms in the coal sector, I am confident that our dependence on imported coal will reduce significantly. India will be able to save thousands of crores of foreign exchange a year if we ramp up our indigenous coal production. Above all, India must be ready for big-ticket reforms in the coming years. The government has recently rolled out a policy to incentivise clean coal technology. India needs to shift its steel-making facilities from traditional coal combustion process to coal-to-gas or coal-to-liquid technology. Clean fuel technology will be the key driver of the new era of industrialisation in India and pave the path of prosperity.