The year 2014 can hardly be termed as unforgettable for Indian industry. Many in the steel industry...
The year 2014 can hardly be termed as unforgettable for Indian industry. Many in the steel industry would have waited for the year to be over as early as possible. Prices are down particularly in the last 3 months and there is no sign for an early recovery. Domestic flat prices went down by 7-9% and long prices came down by 5-6%.
The main worries of steel players hovered around an easy flow of raw materials, Iron Ore and Coal. The year witnessed a historical decision of SC to cancel all coal block allocations numbering around 214 since 1993. The decision itself speaks volume of the enormity of corruption that engulfed the mining industry. Unfortunately the total fall out of the blame is now being borne by the steel industry as the stoppage of production of coal from the running mines and from the unallocated mines has generated huge uncertainty in the functioning of steel plants.
Coal imports not being an option available to the plethora of small and medium plants, they are bearing the brunt.
The allocation of coal mines by e-auction to the highest bidders with adequate reservation for public units and priority allotment to power, steel and cement plants is a welcome decision. In the next two months the outcome of the bidding would be known. Demands from all segments were subdued as manufacturing growth and gross fixed capital formation, the two determinants of steel demand, suffered, while rising logistic costs and raw material costs posed stiff challenges for the producers to soften prices to match imports.
Unabated flow of imports with Boron coated rebars, wire rods and sheets from China spelt disaster for indigenous industry and declining global prices were a dampener to raise exports.
Under this most challenging background, the New Year brings in some positive developments. The Ordinance route for coal auction and land acquisition has demonstrated the commitment of the government to remove barriers to investment in infrastructure and production growth in mining. This is indeed commendable. Shortly it is likely to be followed by raising the cap for FDI in insurance, defence production, solar panels etc.
The government has also earmarked roadways, irrigation and basic connectivity as priority areas for public investment. There is a positive move towards a consensus on GST. The Centre is determined to take care of the apprehensions of the state government about loss of revenue. The disinvestment targets for the ailing PSUs would commence in right spirit from the beginning of the year. Hopefully the Budget, about two months later, would incorporate all these and earmark allocations to the needy sectors and fix a set of feasible targets to achieve.
The task of the government becomes easy as the various challenges faced by the industry in 2014 may well form the basis to work out the strategies for growth and development in 2015.
From the current workings of the government it is abundantly clear that a series of much needed reforms would be initiated in the first few months of 2015. The industry eagerly waits for speedy implementation of all these decisions and announcements. Now that prices have uniformly come down, a revision downward of the interest rate would provide a big relief to the manufacturing sector and specifically the MSME sector.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal