India is on the verge of becoming a net steel importer, which can be dangerous for not only the steel industry in India but also the overall markets. To cope with this, the steel industry needs an investment of around $120 billion or ₹ 10 lakh crore to boost the current capacity of steel production in the nation. You must be wondering about the current capacity of steel production and the required capacity, so in this article, we will be covering these along with other details of the steel market to have a fair understanding of how it is performing now and the outlook.
Current Capacity and Targets for 2030
The current capacity of steel production in India is around 180 million tonnes (MT). The target capacity that needs to be achieved by 2030 to fill the gaps and restrict India from becoming a net steel importer is 300 MT. The gap of 120 MT is huge and requires heavy investment to the tune of around ₹ 10 lakh crore or $120 billion.
Importance of the Steel Industry and Challenges
The importance of the steel industry in India is huge with a whopping per capita steel consumption of around 100 kg. This massive consumption is the prime driving factor for the growth of the industry, which along with the support from the government and favorable policies seems achievable. Moreover, with the increasing capital expenditure and public spending especially in the infrastructure development arena, the growth of the steel industry is inevitable.
While the domestic demand is driving the steel market, however, if India does not act immediately upon expanding the production then it can turn out to into a challenge. If the supply falls short, then India has to import and that will make India a net importer of steel.
The overall imports are already on the rise, jumped 41% in the first half of FY25 while there has been a sharp 36% decline in the exports and that leaves India at the edge of becoming a net importer of steel.
The current challenges of the steel industry also include dumping which affects the profitability of the companies in this industry by depressing the prices. The declining prices of steel are not even the result of increasing basic customs duties as only 38% of the imports are channelized via non-free trade agreements while the remaining 62% falls under free trade agreements and thus hike in basic customs duties will not affect the prices much. This is why it is important to strike a balance between the profitability and the demand.
Due to the recent market slowdown, the prices of steel and its products have tanked as well and so has the demand, which led to inventory accumulation as well as a 30-day stock from the normal 15-16 days stock.
However, while there are challenges, there are solutions as well. The Union Steel Secretary suggested alternatives such as anti-dumping duties but for the same industry petition is required which needs to be directed to the Directorate General of Trade Remedies (DGTR).
Privatization and Disinvestment in Steel Industry
The privatization factor has also played a pivotal role in the industry development. The Rashtriya Ispat Nigam Limited (RINL), one of the primary steel manufacturing units in the public domain has been suffering losses for a long. This calls for disinvestment and privatization of the firms in the sector like RINL, which are not able to cope. This can infuse private investments, which are required to boost the sector and increase the capacity of the production of steel.
Having said that, the steel industry in India is predominantly under private sector dominance. Out of 180 MT of total current production capacity, 150 MT is under private sector. The remaining 30 MT comes from public sector steel plants but those are under crises like RINL. This is why privatization is the key to achieving the target of 300 MT steel production by 2030.
Wrapping up
Thus to achieve the steel industry investment target and the production capacity, the industry needs private players and disinvestment plans for the public steel-producing units, which are running at losses. The future of the steel industry in India can be bright provided it finds a way out from these challenges looming over it and can get $120 billion of investments to achieve the 300 MT target by 2030.
Source: CNBC TV18
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