Amidst the crumbling share prices, subdued industrial production, rising prices and interest rates, and the country agog with the agitation against corruption, the steel industry in India is standing on the threshold of another bout of uncer-tain future, may be of a short duration.
Q1 of 2011 was good, Q2 ominous and Q3 is worse, stagnant and largely unpredictable. The anticipated pull-up effect in Q4 is devoid of robust sentiments. Added to this, the policy supports in the form of enactment of MMD&R and land acquisition, which were expected to be placed for discussion before the highest policy plann-ing body, are delayed. And it had led to many conflicting views to be pouring in from all quarters on various aspects of the Bills.
Already, agencies are downgrading the credit worthiness of a number of reputed companies which has sent shivers to other prospective investors. Consultants and forecasters are busy in lowering the growth projections and that list no longer excludes India. With the sole exception of gold prices, a sign of decline seems to have engulfed the country.
One need not delve deep to find out what exactly is at stake. It is the inability to chart out a roadmap for small doses of specific steps and to actually implement these. Good governance must start at the unit level. When the shutters are down, opening of one window would bring in fresh air and the contagion effect sets in. Steel plants need to focus on capital repairs long overdue, adjustment of EBITDA margin in tune with the market absorption capacity, innovative strategies for tie up with OEMs, tapping more the ongoing projects, preferably those funded by the government and widening the marketing of steel as a raw material to fabricated and customised steel ready to use.
One of the lessons of good governance relates to the transparency, wide publicity and discussion of the policy details, for instance, manufacturing policy. Announcement of this must contain all the little steps necessary to imple-ment the critical aspects of the policy like, creation of industrial clusters to take the share of manufacturing from the current 16% to 25% of GDP. To leave a large part of the implementation of the policy to the discretion of the state governments is not a prud-ent approach and extends much beyond the scope demarcated by the Finance Commission.
Coalition politics may be the order of the day, but it must converge on economic gains for the country as a whole. Dedicated Freight Corridor is another example where economic advantages must precede all narrow provincial considerations to make the people of this country become the real owners of the asset.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal.