New steel policy targets can be achieved under right conditions: Angel Broking

By: | Published: May 5, 2017 11:24 AM

Although the steel ministry has set ambitious targets for Indian steel industries' production capacity, they can be achieved under the right set of conditions.

Steel ministry’s ambitious target for Indian steel industries’ production capacity can be achieved under conducive macroeconomic conditions, supportive government policies and favourable demand-supply dynamics.

Although the National Steel Policy 2017 has set ambitious targets for Indian steel industries’ production capacity, they can be achieved under the right set of conditions, which include conducive macroeconomic conditions, supportive government policies and favourable demand-supply dynamics said Mayuresh Joshi, Fund Manager, Angel Broking in a research note.

“The steel ministry has set an ambitious target of 300 million tonnes by 2030. With demand catching up and recovery seen across the value chain, steel majors, who are also offering value-added products and optimising costs to ensure the margins and the Return on Capital Employed (ROCE) are protected, can wade through the recovery we are seeking,” said the note.

On Wednesday, the Union Cabinet chaired by Prime Minister Narendra Modi gave its approval to the National Steel Policy 2017. The new steel policy represents the long-term vision of the Modi government to give impetus to the steel sector by seeking to enhance domestic steel consumption, ensuring high-quality steel production and creating a technologically advanced and globally competitive steel industry.

The policy projects crude steel capacity of 300 million tonne, production of 255 million tonne and robust finished steel per capita consumption of 158 kg by 2030-31, as against the current use of around 60 kg.

“The policy also envisages domestically meeting the entire demand of high-grade automotive steel, electrical steel, special steels and alloys for strategic applications and increasing domestic availability of washed coking coal so as to reduce import dependence on coking coal from about 85 per cent to around 65 per cent by 2030-31,” Steel Ministry said in a statement.

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The Union Cabinet also approved a policy for use of domestic steel products in government organisations. The policy makes it mandatory to give preference to domestically manufactured iron and steel products (DMI&SP) in government procurement. The policy is applicable to all government tenders where price bid is yet to be opened.

“The DMI&SP policy provides a minimum value addition of 15 per cent in notified steel products which are covered under preferential procurement. In order to provide flexibility, the ministry of steel may review specified steel products and the minimum value addition criterion,” steel ministry said in another statement.

This policy will help the Indian steel industry that had been complaining of pressure from cheap imports from China which coupled with depressed demand have impacted the finances of several steel companies, which in turn are finding it difficult to repay loans.

The preference for local players comes after similar measures in telecom and solar power, decisions that have faced international scrutiny, and an increasing clamour for protectionism even in developed countries. The government has taken these steps to protect local players as China grapples with excess capacity, prompting it to push subsidised steel into markets such as India.

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