Managing director for India and South East Asia at Tata Steel, TV Narendran, says the government should take a cue from other nations in creating tariff and non-tariff barriers to block the huge influx of steel imports, which can undermine domestic units. The soft-spoken IIM-C grad, at the helm of the country’s third-largest steel producer since November 2013, told Surya Sarathi Ray in an interview that the government would do well to hike the customs duty on steel. Excerpts:
What gives you the optimism to predict 5-6% growth in steel demand in the current fiscal, up from last year’s 3.1%?
The government has taken steps to boost infrastructure spending and, with the passage of the MMDR amendment by Parliament, the mining sector would get a boost. The auto industry is also expecting this year to be better than last. All these would surely help in enhancing steel demand.
Imports are galloping. What is its negative impact on the domestic steel industry, particularly on secondary producers? Will it slow down investments and force steel firms to resort to job cuts?
Imports are a major concern.
Steel imports have increased by over 50% in FY15 compared to FY14, and imports from China alone have increased by over 200% during the period. This has a significantimpact on the profitability and performance of the Indian steel industry.
Most countries have moved to bring in tariff and non-tariff barriers to protect their domestic steel industry. We have also represented to the government for a similar action.
Don’t you think the government should immediately impose higher duties to restrict dumping of steel?
The government has already announced an enabling provision to increase the import tariff on steel to 15%. We hope this soon results in an increase in the effective customs duty on steel.
India is losing on the export front as well. What needs to be done to gain ground?
India was a net exporter of steel till a couple of years back. However, steel prices have dropped significantly in the last one year.
Most other exporting countries benefited from their currency weakening against the dollar. But the rupee’s strengthening against other currencies has not helped our cause.
A lot of capacity addition is on its way. Will it impact the already falling utilisation rate?
The capacity utilisation of the Indian steel Industry is 75%, which is not good for its profitability. Steel is a capital-intensive industry and it is not easy to switch on and off depending on short-term price movements. Support from the government is required since we work in an environment where the cost of capital is high.
What’s your view on steel prices in the current fiscal?
I am hopeful that over the next few months steel prices would increase as a result of the increase in domestic demand, capacity closures in China and government steps to reduce unabated imports.