16
By DK AggarwalThe government recently proposed increasing the effective import duty on some steel products to 15 per cent from the current rate of 5 per cent to 12.5 per cent.
However, there are expectations that raising the import duty on steel or steel products will widen the country’s current account deficit.
There is also concern that this may badly hit engineering exports from our country.
At present, India is experiencing in surge in steel imports consequent to the imposition of 25 per cent tariff on steel imports in the US.
The ongoing trade war between the US and China and the impact on the global economic slowdown are causes of concern.
Undoubtedly, the government has been taking steps such as imposing anti-dumping duties, countervailing duties, quality control and circumvention measures – to name a few – to lend support to the industry.
On the flip side, domestic manufacturers are likely to get the boost from demand growth from domestic automotive and manufacturing companies, infrastructure construction and railways sectors.
The automobile sector is getting shaped up and it is expected that this will raise domestic steel demand in a big way.
Also, domestic manufactures have increased investments to expand and upgrade manufacturing facilities in order to reduce reliance on imports.
Besides, they are also bringing comprehensive improvements in entire operations, which are backed by efforts for improving efficiencies and improved techno- economic parameters.
Indian steel manufacturers have started benchmarking their facilities and processes against global standards to boost productivity.
The industry always strives for continuous modernisation and upgradation of older plants and higher energy efficiency levels.
Moody’s says India will be the brightest spot over the next 12-18 months, with the country's steel consumption expected to rise at least 5.5-6 per cent every year, tracking strong GDP growth of 7.3-7.5 per cent.
The price hike announced by the domestic steel companies this September should reflect in higher margins in December quarter.
A robust steel industry is essential for economic growth of any country, as it supports all other industries for industrialisation.
The Modi government’s thrust on infrastructure projects and rising consumer spending are likely to boost demand.
The growth in India’s steel sector has been driven by domestic availability of raw materials, such as iron ore and cost-effective labour.
At present, the government is targeting steel production capacity of 150 million tonnes by 2020.
Major public and private companies, including Tata Steel and SAIL, are expanding production capacity and strengthening their positions through cross-border mergers and acquisitions.
Besides, several global players have been planning to enter the market, seeing the growth potential for the Industry.
(DK Aggarwal is Chairman Managing Director of SMC Investments Advisors)
