It is now widely perceived that unless more reforms are initiated in various sectors and that too briskly, the Indian economy would continue to head south in the current fiscal. The monsoon session of Parliament, which will last till next fortnight, will largely determine the direction of the economy.
One must appreciate the efforts put in by the government to resolve the logjam afflicting the critical sectors of the economy in terms of investment, taxes and duties, policy uncertainties and clearances. But the story does not end with announcements and formation of high-level committees. The implementation of the decisions taken must be given topmost priority. And there is absolute unanimity that our record in this particular area has been abysmally poor. It has become more challenging nowadays as the implementation of most of the decisions falls under the purview of the state governments, which may take an opposite view on the issue. Thus, a lot more responsibility rests on the members of those high-level committees to monitor that decisions are actually implemented and bottlenecks, if any, are removed.
Subdued market conditions have affected the net margin of operation for several industries, leading to postponement of fresh investments. But the latest withdrawal of Arcelor-Mittal and Posco from mega investments in steel capacity in India points more towards the uncertainties in sourcing raw materials and acquiring land, and less towards the grim demand scenario.
India has a massive deficit in infrastructure ? whether it?s power, roads, rails, urban infrastructure, ports, bridges, irrigation, fertiliser plants or refineries, all of which require a lot of steel. The huge demand potential for steel in coming years is beyond doubt and, therefore, all steps that facilitate investments in critical sectors of the economy (without ignoring national interest, of course) must be attended to.
The steady depreciation in the rupee is neutralising the fall in coking coal spot prices and the adverse impact can be further minimised by judicious hedging. That Indian steel producers in the midst of capacity expansion are also taking steps to enhance raw material sourcing clearly indicates that steel demand is going to expand to necessitate fresh indigenous availability.
Apart from investing in captive mines to enhance productivity and output by engaging outside agencies (Lanco for Tasla mines by SAIL), the rush to acquire Stemcor- owned iron ore mines and other facilities, including a pellet plant near Barbil by SAIL, Tata and JSPL shows the intense effort of indigenous manufacturers to ensure smooth availability of steel in the coming years, and mostly through the brownfield route.
The pick-up in demand may also encourage mergers and acquisitions instead of greenfield expansion. As rising steel imports are no longer compatible with the containment of CAD, the expansion of domestic capacity needs maximum facilitation as it had happened in China, Turkey, Vietnam and Indonesia.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal