siliconindia | | October 20219Says Dr. Aruna Sharma, former Secretary of Steel - Government of India, "The Budget for 2020-21 has recognised the fact that focus on infrastructure will boost the economy. Steel and cement are major inputs for infrastructure. With the concept of `lifecycle' in General Financial Rules (GFR), the shift in government spending is more on steel structures in 100 years life span and negligible maintenance. The consumption of steel per capita moved from 46 kg to 57 kg in seven years. This increased to 74 kg in just four years since 2016. India being a low infrastructure country, needs lots of structures to be built by 2030, and consumption is targeted to reach 160 kg per capita. Thus the consumption scenario is upscale. With the manufacturing of steel, opening up of coal mines, and iron ore mines being operative and coal prices becoming stable, all-steel manufacturers have expansion plans. Thus the steel manufacturing capacity will increase from a decent 142 million tonnes to 175-200 million tonnes in coming three years and rise to 300 million tonnes." With visible signs of a revival in steel demand and improvement in capacity utilisation, the impact of Covid-19 is unlikely to see having any kind of impact on the steel sector going forward. This has been the trend not just in India, but worldwide as well. China, which is the largest steel producer in the world, is likely to cross the one billion metric tonne mark for the first time. While there will be a revival in demand for finished steel, the Indian steel industry is likely to face other challenges in 2021. These will primarily be on the trade front and because of the plethora of levies being faced by the steel industry. The sector's costs have been affected by high logistics costs, high finance costs, and levies outside GST, including royalty, District Mineral Fund, Electricity Cess, and Clean Energy Cess. According to the Niti Aayog, these levies amount to around $80 per tonne of steel produced. Along with the high logistics and finance costs, Indian steel mills pay over $100 in levies compared to their peers worldwide. Says Dr. Sharma, "What is needed is continued boost to infrastructure, ensuring duty structure is logical and not knee jerk (case of removal of duty on stainless steel that will have an adverse impact) and credit availability. Special steels are also looking forward to taking advantage of production-linked incentives. India is already number two and is set for a higher trajectory. It needs responsive problem-solving policies in mining and steel to make that happen." While the steel industry is on the threshold of a demand revival which will be profitable for the industry, the government needs to provide a level playing field to this sector and reconsider the levies being paid by this sector so that it can compete globally and continue to contribute to India's GDP.
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