Export-led bailout

A joint front in steel could be the answer

Whatever has happened to the much-awaited steel policy? After circulating a draft policy more than six months ago, nothing much is heard on that front. Producers also do not seem to be overawed by it as the main problem is not being addressed. If the steel industry is in a spot today, it has much to do with over-capacity and dwindling domestic demand. Unmindful of ground realities, capacities were added. The Industrial Development Bank of India in fact has a substantial exposure to the steel sector, most of which is classified as non-performing. This is the core issue and since it cannot be wished away, the least the industry can do is to bide time by tightening their belts and increasing productivity. Though individual producers were able to raise steel exports last year, this cannot be counted upon for all times to come. In the teeth of mounting competition, international steel producers are also jostling for space. And, as they are also not in the pink of health, they would lobby against imports. That is why Indian steel was at the receiving end in Europe, Canada and the US.

Though we have successfully resolved some of these anti-dumping measures initiated against steel exports from India, we should be prepared to face such irritants off and on. But that does not mean that we should shift away from an export-led strategy. Given that India’s share in the three million tonne world steel market is a paltry one per cent, it is all the more reason to step up ones’ presence in the global market. At the same time, however, there is such a big demand-supply mismatch that local demand is unlikely to pick up until heavy investments in infrastructure and industry materialise. But in the short-run, such possibilities are highly improbable. While producers have embarked on a programme of consolidation or split-ups depending upon the severity of the problems they face, efforts are also on to form strategic partnerships to weather the storm. By putting up a joint front, the proposed Indian steel alliance hopes it has a better chance to succeed with exports. At the same time, the alliance has grand visions of farming out the domestic market on a zonal basis. These measures are welcome, but producers will have to tread cautiously.