Atmanirbhar way of steel availability

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Updated: Sep 29, 2020 9:20 AM

If the current capacity is way below the requirement, there is an urgent case for capacity augmentation which requires fresh investment, either by the existing or new producers or by inviting FDI into the sector.

While the registration was earlier mandatory for the imports of about 300 steel and iron products, its scope has now been widened to include about 530 more products.The acquisition marked the entry of the GFG Alliance into India.

One major element in the concept of Atma Nirbhar Bharat is replacement of imports. There are a few vulnerable sectors where increasing production by way of higher capacity utilisation is an answer. If the current capacity is way below the requirement, there is an urgent case for capacity augmentation which requires fresh investment, either by the existing or new producers or by inviting FDI into the sector. Both increased level of production and setting up of additional capacities would pre-assume that the demand would be sustained to justify investment. And if indigenous demand is lagging, the new unit or the expanded old unit and the group of them must be engaged in exports. This would provide the much-needed economy of scale and the option to switch. However, the capability of export engagement continues to be challenging and the challenge varies from finished product to the raw materials that it is going to substitute.

Each sector can identify a few products which are getting imported directly and these can be replaced through domestic supply. It would thus lead to ‘atmanirbharata’. Each sector also has a long list of indirect imports which are embedded in the finished good that ultimately gets imported. For textile sector, it is the special kind of textile machinery or for the mining sector, the excavators or cranes of massive capacities. As these items are built or constructed in other countries, the special steel that is needed to manufacture these, is procured by these countries from the sources that have become, over the years, the part of the Global Value Chain (GVC).

Many a times we come across the domestic industry claiming to have created the capability of manufacturing those special steel grades and dimensions which go into the production of the whole gamut of engineering items that are getting imported. As the requirement of steel in the total manufactured and finished item is small, the capability of Indian firm to produce these special steels would not entitle it to get the order. It needs to be a part of this type of manufacturing by supplying those small requirements at competitive prices at the place of manufacturing which is a bit far-fetched but not impossible if it can combine the order for multiple items where these grades are needed. What is needed is an excellent marketing of the capability of producing those grades and exporting at a competitive price and quality at a time these are required. Marketing agents in particular locations can facilitate the operations, may be through a warehouse where the special steel can be stored in bulk. There are a few ports like Antwerp which is offering excellent storage space near the port to take care of all necessary export formalities from India.

The second option is to incentivise MNCs including large machine building manufacturers (South Korea, USA, Japan) to set up facilities in India to manufacture the variety of engineering goods currently being imported. The procurement of steel from indigenous sources to produce those items would then become highly cost competitive and it would be the ultimate stage of Atma Nirbhar Bharat. In this case also, the ability of the firm to become a part of Global Value Chain would be imperative to achieve economy of scale in operation which would go a long way to reduce the total cost of production. In the ultimate analysis, unless the unit plans for and works diligently to become a part of the chain, it may find that supplying of small volume of special steel to Indian operation only is not worthwhile and commercially untenable after a few years. The success of these efforts would add to more steel consumption by India in the coming years.

The alternative to the above remains in the capability of various segments of capital goods sector (fabricated metal products, forged metal products, transformers, material handling equipment, firefighting equipment, printing machinery) to create capacities to indigenously manufacture these finished products and replace imports.

Atmanirbharata has therefore several connotations. For instance, India imported 7.16 MT of steel in FY20 valued at Rs 46,216 crore. A few items, namely CRGO steel of 0.23 MT valued at Rs 1,763 crore, auto grade/ special alloy/SS sheets of 0.3 MT valued at Rs 2,282 crore and API (>x 70) grades HRC, Plates and Pipes of 0.45 MT valued at Rs 3,627 crore have been imported due to indigenous non-availability of equivalent grade and dimensions. Indigenous manufacturing capabilities of producing these items are being developed and currently stand at various stages. Although the same would not contribute to more consumption of steel as imports are included in apparent consumption estimates, it would offer export opportunities that would compensate any sudden drop of domestic demand.

(The author is Former DG, Institute of Steel Development and Growth. Views expressed are personal)

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