Steel Industry – Current challenges, National Steel Policy 2017, etc

Steel Industry – Current challenges, National Steel Policy 2017, etc

How friendly government policies can boost Indian steel industry

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issues faced by steel industry

The steel industry forms the backbone of the economy. This article highlights the difficulties of the industry magnified the pandemic. Ans suggest ways to revive demand.

BAT could help

  • Introduction of a Border Adjustment Tax, known as BAT could help India’s steel industry.
  • Many countries use BAT to protect local steel manufacturers.
  • With economic pain unleashed by the pandemic and threat posed by Chinese state-subsidised steel imports, India hardly affords not to BAT.
  • BAT would create a level playing field.

Why Indian steel industry is non-competitive

  • Indian steel manufacturers bear multiple local taxes – electricity and cross-subsidy duties, clean energy cess and royalties on ore and there are more.
  • These taxes make up 12% of the price of steel.
  • In rival markets, these levies either do not exist or are comparatively lower.
  • So Indian steel is non-competitive even before it leaves our plants.

Impact of Covid

  • Impact of Covid on India’s biggest steel mills, which make up 65% of the country’s annual output of about 110 MT, was calamitous.
  • During the pandemic, the mills’ massive blast furnaces continued to burn.
  • Closure and reopening of furnaces can take up to 12 weeks; the process is complex, and maintenance costs are high.
  • So, the furnaces were burning during the lockdown.
  • India’s mills have continued to bear high fixed costs: firing furnaces but without making much steel.
  • Because of this, smaller mills, which account for about a third of national output, lack the strengths to survive a trough, and many have capitulated.

Significance of Steel Industry

  • Steel is front and centre in India’s recovery.
  • The industry rests on mutual support – investment is made by entrepreneurs, the government offers supportive policies.
  • Government will lend weight to India’s competitive and comparative advantages, especially in manufacturing, in a post covid-19 economic order.
  • Indian steel’s guiding light is a steel ministry vision of 300MT of capacity by 2030, currently at about 138 MT.
  • The pandemic will put pressure on this target.

Short term hurdles faced by Steel industry

  • Government capital expenditure is diverted to public health.
  • Real estate builders have an interest in large scale construction.
  • Car manufacturing will not see upturn until the second half of the year.
  • The pandemic has also hurt demand for capital utilisation, weighing heavily on capex.

How the demand can be improved

  • Steel needs more infrastructure projects. Also, the fillip would be for the government to pay on time. Expedite the work.
  • An initiative to consign old cars to the scrap heap would significantly lift demand for steel to build replacement cars.
  • Improving the logistics chain would help transport finished goods and materials more quickly and less expensively.
  • Make steel the material of choice in the construction of flyovers, roads bridges and crash barriers, improving their safety, durability and, as a result, their life-cycle cost.
  • Indian mills possess world-class infrastructure and capacities and have integrated backwards by acquiring mining rights, partly to mitigate costs. As mentioned, one is high taxes on input materials such as energy.

Consider the question “Examine the issues Indian steel industry faces. Suggest the ways to make it more competitive.”

Conclusion

A revived economy means a revived steel industry. The government should provide the wider and deeper support to the government to bring this vital sector back on the track and make help achieve global competitiveness.

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

[pib] Steel Scrap Recycling Policy

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Steel scrap

Mains level : Steel production and associated factors


  • Ministry of Steel has issued the Steel Scrap Recycling Policy.

Steel Scrap Recycling Policy

  1. This will ensure scientific processing & recycling of ferrous scrap generated from various sources and a variety of products.
  2. The policy framework shall provide standard guidelines for collection, dismantling and shredding activities in an organized, safe and environmentally sound manner.
  3. The policy aims to achieve the following objectives –
  • To promote circular economy in the steel sector.
  • To promote a formal and scientific collection, dismantling and processing activities for end of life products that are sources of recyclable (ferrous, non- ferrous and other non-metallic) scraps.
  • It will lead to resource conservation and energy savings and setting up of an environmentally sound management system for handling ferrous scrap.
  • Processing and recycling of products in an organized, safe and environment friendly manner.
  • To evolve a responsive ecosystem by involving all stakeholders.
  • To produce high quality ferrous scrap for quality steel production thus minimizing the dependency on imports.
  • To decongest the Indian cities from ELVs and reuse of ferrous scrap.
  • To promote 6Rs principles of Reduce, Reuse, Recycle, Recover, Redesign and Remanufacture through scientific handling, processing and disposal of all types of recyclable scraps including non-ferrous scraps, through authorized centers / facility.

Background

  • Steel is a material most conducive for circular economy as it can be used, reused and recycled infinitely.
  • While iron ore remains the primary source of steel making, used or re-used steel in the form of Scrap is the secondary raw material for the steel industry.
  • Indian steel industry is characterized by the presence of a large number of small steel producers who utilize scrap with other inputs for steel making.

 Why focus on scrap steel?

  • The availability of scrap is a major issue in India and in 2017 the deficit was to the tune of 7 million Tons.
  • This was imported at the cost of more than Rs. 24,500 crores (approx.) in 2017-18.
  • The gap between demand and supply is can be reduced in the future and the country may be self-sufficient by 2030.
  • The scrap has to be channelized so that the same can be utilized for steel production in an environmentally friendly manner.

Commercial significance of scrap

  • Scrap is an important input for the electric furnaces.
  • If quality scrap is provided as the charge to the electric furnaces, then the furnaces can produce high grade steel.
  • High Grade Steel Scrap shall not have the impurities if processing is done with the scrap processing centres and by shredders etc.
  • The high-grade steel scrap shall be recycled to produce high grade steel again, to be used in the industries such as equipment manufacturing, automobiles and other downstream industries.
  • Scrap with less or no impurities shall result in better long products that are commonly used in the construction industry and is common use steels.
  • If better-processed scrap is produced in the country, it shall result in not only import substitution of scrap but also import substitution of high-end steel that is currently imported in the country.

Climate-friendly

  • Scrap based steel making technologies have been envisaged as one of the important options to reduce GHG emission intensity.
  • This shall also contribute in adopting the principle of 6Rs i.e. Reduce, Reuse, Recycle, Recover, Redesign and Remanufacture to avoid any adverse impact on the environment.
  • There is a worldwide trend to increase steel production using scrap as the main raw material as recycling of scrap helps in conservation of vital natural resources besides other numerous benefits.

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Steel production in India seen increasing to a record in FY18

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Anti-dumping duty

Mains level: Result of Government’s efforts implemented recently.


News

Record amount of steel production

  1. India has produced 86.7 million tonnes (mt) in the nine months to December from 73.96 mt in the previous year, according to provisional figures from the steel ministry
  2. India, in fact, has been a net exporter of steel for the past 13 months and has surpassed Japan to be the world’s second largest exporter
  3. Result of government’s policy: Last year, the government took steps to protect steel makers, construction activity rebounded and China shut down illegal factories.

Last year’s National Steel Policy

  1. The policy had projected crude steel production capacity will increase to 300 mt per year for 2030-31 from 100-120 mt now came on heels of the government introducing a minimum import duty (MIP) on certain steel products,
  2. and an anti-dumping duty on products from China and European countries
  3. The duty on Chinese products was later extended to five years

Need for consolidation

  1. The top six producers account for half of all steel manufactured in India, the rest of the business remains fragmented, making it ripe for consolidation

Back2basics

Anti-dumping duty

  1. A penalty imposed on suspiciously low-priced imports, to increase their price in the importing country and so protect local industry from unfair competition
  2. Anti-dumping duties are assessed generally in an amount equal to the difference between the importing country’s FOB price of the goods and (at the time of their importation) the market value of similar goods in the exporting country or other countries

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Steel ministry seeks abolition of coking coal import tax

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Import duty, coking coal

Mains level: Steps required to boost domestic manufacturing


Rising costs of import

  1. India’s steel ministry is seeking to remove import tax on coking coal to soften the impact of rising costs on users of the key steel-making fuel
  2. The department has also proposed removing taxes on ferrochrome and ferro-nickel, ingredients used in making stainless steel
  3. This will promote the production of the alloy crucial for the plan to boost domestic manufacturing

Why rise in prices?

  1. Benchmark prices of premium coking coal have risen 34% over the past year after cyclone Debbie affected supplies from Australia, the biggest shipper of the commodity
  2. Prices may spike again if another similar weather disruption occurs

Back2Basics

Import duties

  1. Import duty is a tax collected on imports and some exports by the customs authorities of a country
  2. It is usually based on the value of the goods that are imported
  3. There are two distinct goals to import duties: to raise income for local government and to give a market advantage to locally grown or produced goods that are not subject to import duties
  4. A third related goal is sometimes to penalize a particular nation by charging high import duties on its products
  5. Around the world, several organizations and treaties have direct impacts on import duties
  6. These may be WTO or other regional groupings or even FTAs

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

India’s steel exports rise in 2017 as China’s plunge

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: ITC

Mains level: Government’s efforts


News

Rising steel imports

  1. India’s iron and steel exports during the month were more than double their imports
  2. A year ago, India’s iron and steel imports were about three times their exports and local steelmakers were pleading with the government for protection

What brought about this turnaround?

  1. While a lot of the credit for it was rightly given to the government’s decision to protect the domestic industry by imposing a minimum import price (MIP), anti-dumping duty, etc. on steel imports
  2. An important factor was also the fact that Chinese steel exports had started plunging
  3. Data sourced from the International Trade Centre (ITC) reveals that starting January 2017, Chinese steel exports have been dropping by at least 25% year-on-year every month

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

ArcelorMittal-SAIL set to make auto steel in India in 3 years

Note4students

Mains Paper 3: Science & Technology | Science and Technology- developments and their applications and effects in everyday life Achievements of Indians in science & technology; indigenization of technology and developing new technology

From UPSC perspective, the following things are important:

Prelims level: Particulars of the Automotive Steel

Mains level: Why important for India?


News

Production of auto steel

  1. Steel Authority of India Ltd (SAIL) will start producing automotive steel in a $1 billion partnership with ArcelorMittal in three years
  2. SAIL has approved entering into a “non-binding” agreement of terms on the joint venture with the world’s biggest maker of the alloy
  3. SAIL said a definitive agreement with ArcelorMittal would be “finalised in due course subject to financial viability”

Possible benefits of this agreement

  1.  It will help in cutting down imports of high-grade steel as the country revs up car manufacturing

Importance of this deal

  1. India is banking on the SAIL partnership with ArcelorMittal to cut imports of high-grade auto steel, which mostly comes from Japan and South Korea
  2. India is a major automobile producer and exporter, and the country is stepping up manufacturing under Prime Minister Narendra Modi’s “Make in India” campaign

Back2basics

Automotive Steel 

Clikc2read

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Centre to wipe out rust with galvanised steel II

  1. India is the third largest producer of zinc
  2. This measure will boost consumption of zinc as well as steel and curb losses of thousands of crore to the economy due to corrosion
  3. Context: The large scale infrastructure expansion under way in sectors such as roads, airports, power, ports and railways
  4. Developed nations use galvanised steel for infrastructure projects, but in India, it’s not yet mandatory

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Centre to wipe out rust with galvanised steel I

  1. Policy proposal: The Centre is considering a proposal to mandate galvanisation of steel in sectors such as automobile, construction and infrastructure
  2. Why: This will help build corrosion-resistant vehicles and buildings
  3. What is it:Galvanization is the process of applying a protective zinc coating to steel or iron, to prevent rusting
  4. Zinc-coated steel would last much longer than regular steel, especially in corrosion-prone areas along India’s long coastline

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Overhaul steel policy: NITI Aayog’s Saraswat

  1. Present status: India is now the third largest steelmaker in the world
  2. Problem: A global glut and a surge in cheap imports from China, Russia, Korea and Japan has dented the domestic industry’s fortunes
  3. The sector’s share in the banking system’s stressed assets kitty has gone up to 25 per cent
  4. The steel sector had flourished between 2003-04 and 2007-08
  5. Presently, the government is trying to support the industry through the RBI’s strategic debt restructuring scheme
  6. But it needs long-term finance like pension funds which can withstand cyclical volatility of profits unlike funding from banks or capital markets
  7. India’s steel production cost is about $320-$340 per tonne compared to $400 in China and the global average of $390
  8. But it is uncompetitive in global markets due to freight costs, higher credit costs, industrial power tariffs, high iron ore royalties, import duties and cess on coking coal.

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Govt extends steel floor prices for two months to curb cheap imports

  1. Context: Cheap imports from China are becoming an increasing cause of worry for our native steelmakers
  2. Earlier in february, for the first time in 15 years – govt. had introduced a minimum import price to safeguard our local steel production
  3. An Indian government body recommended this week the introduction of provisional anti-dumping duty on imports

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Steel firms may get NIIF funding support

  1. Context: Government is looking at creating a fund under India’s first sovereign wealth fund, NIIF
  2. Aim: To address capital requirements of domestic steel companies
  3. Sectoral funds: Government is working on operationalising NIIF envisaged as a mother fund and within that there will be specific sectoral funds
  1. Context: Government is looking at creating a fund under India’s first sovereign wealth fund, NIIF
  2. Aim: To address capital requirements of domestic steel companies
  3. Sectoral funds: Government is working on operationalising NIIF envisaged as a mother fund and within that there will be specific sectoral funds

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Govt issues anti-dumping notice on steel products

  1. Context: DGAD has issued notices to China, Japan and South Korea proposing to initiate a probe on the dumping of some steel products into India
  2. DGAD: Directorate General of Anti-Dumping and Allied Duties
  3. Materials: Notices have been issued for hot-rolled coils of alloy and non-alloy steel
  4. Why? Indian steelmakers had approached DGAD seeking anti-dumping duties on the cheap imports flooding the local markets and pressuring margins
  5. Data: The imports of steel into India rose 20.5% in the 11 months to February, compared with the same period last year
  1. Context: DGAD has issued notices to China, Japan and South Korea proposing to initiate a probe on the dumping of some steel products into India
  2. DGAD: Directorate General of Anti-Dumping and Allied Duties
  3. Materials: Notices have been issued for hot-rolled coils of alloy and non-alloy steel
  4. Why? Indian steelmakers had approached DGAD seeking anti-dumping duties on the cheap imports flooding the local markets and pressuring margins
  5. Data: The imports of steel into India rose 20.5% in the 11 months to February, compared with the same period last year

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Govt prepares bailout for steel sector

  1. Context: Govt plans a financial package to help revive the steel sector
  2. Benefit: It will prevent bank loans advanced to steel firms from turning bad
  3. Issues: Poor demand, price slump, competition from cheaper imports and delays in project execution
  4. Similar steps have been taken in the roads and power sectors
  5. It comes when the banking system faces considerable stress from non-performing assets

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

New steel import duty to prevent hawala

  1. Context: Commerce ministry has asked finance ministry to seize the price differential between minimum and the actual import price
  2. Why? The differential between the minimum and actual import prices may fuel inflow of black money
  3. How? Since the MIP is higher than the import price of steel, it is apprehended that bulk importers may over-invoice imports and transfer the price differential to India through the hawala route
  4. Background: Govt had announced the MIP for 173 steel products to curb the dumping of cheap steel by countries such as China, Russia, Japan and South Korea
  1. Context: Commerce ministry has asked finance ministry to seize the price differential between minimum and the actual import price
  2. Why? The differential between the minimum and actual import prices may fuel inflow of black money
  3. How? Since the MIP is higher than the import price of steel, it is apprehended that bulk importers may over-invoice imports and transfer the price differential to India through the hawala route
  4. Background: Govt had announced the MIP for 173 steel products to curb the dumping of cheap steel by countries such as China, Russia, Japan and South Korea

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

Government yet to decide on MIP for steel

  1. The government has been considering proposals (including MIP) to protect domestic steel manufacturers from cheap imports mainly from China.
  2. It is in the process of undertaking a tariff-line wise detailed assessment to find out the sub-segments that are affected the most.
  3. Need protection in terms of anti-dumping duty, countervailing duties (or anti-subsidy duties) and MIP.
  4. The user industries have been representing and arguing for their continuing access to low-cost imported steel to balance the domestic supplies.
  5. India has considerable installed capacity and it is operating at about 80 per cent, which is a higher load factor than the rest of the world, averaging about 68 to 70 per cent.

The government is yet to take a decision on fixing minimum import price (MIP) for steel.

  1. The government has been considering proposals (including MIP) to protect domestic steel manufacturers from cheap imports mainly from China.
  2. It is in the process of undertaking a tariff-line wise detailed assessment to find out the sub-segments that are affected the most.
  3. Need protection in terms of anti-dumping duty, countervailing duties (or anti-subsidy duties) and MIP.
  4. The user industries have been representing and arguing for their continuing access to low-cost imported steel to balance the domestic supplies.
  5. India has considerable installed capacity and it is operating at about 80 per cent, which is a higher load factor than the rest of the world, averaging about 68 to 70 per cent.

By Root

Caretaker @civilsdaily

Steel Industry – Current challenges, National Steel Policy 2017, etc

India steels itself to face impact of yuan devaluation

  1. China’s central bank has followed up on Tuesday’s devaluation of the yuan by 1.9% with another 1% cut on Wednesday.
  2. This is so that Chinese manufactured products become cheaper in the world, and that demand for them increases compared to products from other countries.
  3. India has responded to this by increasing the import duty on certain steel products (that are imported from China) by 2.5%
  1. China’s central bank has followed up on Tuesday’s devaluation of the yuan by 1.9% with another 1% cut on Wednesday.
  2. This is so that Chinese manufactured products become cheaper in the world, and that demand for them increases compared to products from other countries.
  3. India has responded to this by increasing the import duty on certain steel products (that are imported from China) by 2.5%

By Root

Caretaker @civilsdaily

By Root

Caretaker @civilsdaily

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