The National Steel Policy 2017 announced by the steel ministry is betting on higher spending on infrastructure and construction through government initiatives to push steel demand and increase utilization, India Ratings and Research (Ind-Ra) has said in its latest report.
While the policy will give a boost to the struggling Indian steel industry, the execution of provisions in the policy will remain a key challenge for the government, Ind-Ra noted. The policy sets guideline to address key issues facing the industry like muted demand, over capacity, raw material price volatility and technology inefficiency, which if adhered to diligently will enable the industry to be better placed to absorb any external shocks, the report added.
To achieve expected demand of 230 million tonne (mt) in 2030-31, steel demand will need to grow at a CAGR of around 7-7.5 % during the period against a CAGR of 3.5% – 4 % over the last 5 years.
In order to protect the domestic industry from imports to meet the accelerated demand growth, the government has announced another policy, which provides preference to domestically manufactured iron & steel products for government procurement with immediate effect.
The policy is likely to boost demand and realizations of domestic producers as they will not have to compete with imported material and is likely to increase capacity utilization though it will be marginal.
Image source: Minestories