STEEL MINISTER FLAGS IMPORT DEPENDENCE
RAM CHANDRA PRASAD SINGH has taken charge of the Union Ministry of Steel at a time when the sector is on an upcycle. In conversation with Jyoti Mukul, Singh talks about two recent government decisions on the PLI scheme, coking coal imports from Russia, and the tightrope walk between free pricing and high cost of steel.
RAM CHANDRA PRASAD SINGH, a former Indian Administrative Service officer of the 1984 batch, is the face of Nitish Kumar-led Janata Dal (United) in the Narendra Modi government. He has taken charge of the Union Ministry of Steel at a time when the sector is on an upcycle. In conversation with Jyoti Mukul, Singh talks about two recent government decisions on the production-linked incentive (PLI) scheme, coking coal imports from Russia, and the tightrope walk between free pricing and high cost of steel. Edited excerpts:
What are the key challenges you intend to focus on?
What is most worrisome is our dependence on imports. Currently, we are spending around ~75,000 crore on coking coal imports and ~30,000 crore on the import of specialty steel. We are spending ~1 trillion on imports alone. We have to work towards reducing these imports. To address both, we have got two Cabinet approvals. One was to enter into a memorandum of understanding with Russia for importing coal to India and diversify supply. The announcement of the PLI scheme for specialty steel is also a step towards making Bharat atmanirbhar.
Financial infusion and liquidity into the steel sector pose a twin challenge to the sector, especially for smaller players. I would like to see how best this issue can be addressed.
The other aim is to reduce carbon footprint while staying globally competitive.
How far will the ~6,322-crore PLI help steel players that have put up specialty steel plants?
The scheme has been formulated after considering the needs of the industry and the country. While steel producers will be incentivised for producing value-added steel, India’s import dependence will reduce and export capability will improve.
At present, 18 million tonnes (mt) of specialty steel is manufactured in the country of a total steel production of 102 mt. Several steel players — both integrated steel plants and others — are into the business of making specialty steel. There are some product categories, such as specialty rails, cold-rolled grain oriented, American Petroleum Institute grade steel, etc, which are not manufactured or manufactured in limited quantities. We expect the PLI incentive of ~6,322 crore to help the existing players and the ones who would like to enter this arena.
What are the government estimates of investment in the steel sector, especially the specialty steel segment?
To achieve 300-mt capacity by 2030-31, ~8-10 trillion of investment will be needed by the steel sector. As far as specialty steel is concerned, the investment needed to achieve 42-mt production by 2026-27 is around ~40,000 crore.
Will the estimated specialty steel production of 42 mt by 2027 help in meeting the entire demand after the next five years?
The production of 42 mt by the end of the scheme in 2027 will not only meet India’s specialty steel demand, but also its export demand. Domestic players of these products will enter the global market, thereby enhancing exports from the current 1.7 mt to an expected 5.5 mt.
Union minister Nitin Gadkari has called for a reduction in steel prices. There was around 15 per cent increase in domestic price in 2020-21 over 2017-18.
The private sector contributes 86 per cent in steel production and the public sector 14 per cent. When you go in for reforms and open up the economy, it cannot be half-way. The increase in the price of steel does impact other sectors. But steel is a deregulated sector, where prices depend on a lot of factors. These include demand and supply, global market conditions, trends in price of raw materials, logistics cost, power and fuel cost, etc. I am seized of the matter and will look into it.
The government has taken several steps to ensure the availability of steel to endusers at reasonable prices. For this, efforts were made to ensure production ramp-up of iron ore and steel to increase their domestic availability, so as to bridge the demand-supply mismatch, which would result in softening the steel prices. Further, several tariff measures have been announced in Budget 2021-22 to ensure reduction in steel prices. These include Customs duty reduction, and temporary revocation of anti-dumping duties and countervailing duties on certain products to improve supply in the domestic market.
CONSOLIDATION IS A MARKET PHENOMENON. IT LEADS TO ECONOMIES OF SCALE, BETTER SYNERGIES, TECHNOLOGY TRANSFER, EXPERTISE SHARING, FINANCIAL STRENGTH, AND OPTIMISATION OF PRODUCTION AND MARKETING”
The integrated steel business has five major players after the sale of companies under the Insolvency and Bankruptcy Code. Do you think such a consolidation is good for the sector?
There should be competition. Else there will be degeneration. All decisions on mergers and acquisitions, consolidation, etc are taken by companies, keeping in mind their business interests.
Consolidation is a market phenomenon. It leads to economies of scale, better synergies, technology transfer, expertise sharing, financial strength, and optimisation of production and marketing.