Union Budget 2021 Expectations for Steel industry: The upcoming Budget must consider the role of the steel industry in making India self-reliant, and must ease its working with targeted interventions
By Dilip Oommen
Union Budget 2021-22 Expectations for Steel sector: As the backbone of the economy, the steel sector continues to play a pivotal role in India’s journey towards the ambitious target to achieve a $5 trillion economy goal by 2024. Despite unprecedented challenges due to Covid-19 and subsequent lockdowns, the government’s vision of ramping up steelmaking capacity to 300 million tonnes by 2030 remains unaltered.
The industry too made a swift turn-around in spite of strong headwinds during this health crisis on the back of its inherent fundamentals and strong resilience. In fact, the latest report on the steel industry by rating agency ICRA also upgraded its outlook for the Indian steel sector to ‘stable’ on the back of improving demand, prices, and normalising business environment. The domestic steel sector has seen a strong revival from the second quarter of 2020-21 onwards, aided by a combination of factors—a strong retail demand emanating from a thriving rural economy, and green shoots of recovery in white goods and the automobile sector, especially from tractors, passenger vehicles and two-wheelers.
Overall, the sector is well poised to contribute to the PM Narendra Modi’s clarion call of making India self-reliant or Atmanirbhar Bharat. Hence as an industry, we are looking forward to some announcements in the Union Budget 2021 by FM Nirmala Sitharaman, benefitting the sector.
Ease of Doing Business: Single window clearance for mega projects (greater than 5,000 crore):
Infrastructure development is one of the key pillars of the PM’s vision of Atmanirbhar Bharat and to deliver on that vision, it is imperative to make provisions and drive initiatives that further boost the ease of doing business for local as well as global enterprises. It is encouraging to know that according to the latest World Bank report of ‘Ease of Doing Business 2020’, India has ascended 17 positions to be ranked number 63 amongst 190 economies, besides being listed amongst other economies for notable improvements.
We believe that structural reforms can be rolled out for a single-window clearance for mega projects that invest more than Rs 5,000 crore in the country. These would not only spur growth in the sector but also speed up developmental project timelines. We also urge the government to consider the following key factors to improve business sentiment and ensure a smoother transition from business blueprints to on-ground manufacturing:
1 Environmental clearance
2 Land acquisition
3 Statutory clearances for construction/right of way
4 Self-certification process
Besides these, it would be beneficial if there are minimum retrospective amendments to existing and newly proposed policy framework along with strategic central government incentives for mega investments in the country.
Steel plants are one of the largest strategic projects for any country and have a very strong multiplier effect on the state and national economy. Hence, the government can also offer tax incentives to any large project proponent investing in this sector.
Taxes and GST: From a taxation perspective, we believe a reduction in personal income tax will help drive the demand for white goods like refrigerators, washing machines, dishwashers, etc, which directly will push the demand for steel and allied products.
Moreover, the government should consider the inclusion of electricity duty, natural gas, and royalty payments under the ambit of GST that will have a positive impact on many industries, and not just steel alone.
Demand boosters: In order to boost demand, the government should take into consideration various stimuli to push big-ticket infrastructure projects with a focus on augmenting the commercial road and railway network across the country.
The current Pradhan Mantri Awas Yojana (housing for all) is already contributing in shoring up overall demand for steel, and we look forward to more investment in the scheme. It would be prudent to provide tax incentives for the first time home or auto buyers in the upcoming budget.
Mining sector reforms: For the allied mining sector, we urge the government to avoid retrospective amendments to Mines and Minerals (Development and Regulation) Act, which affect bonafide and genuine lessees.
Also, review of the current IO pricing methodology is needed, as it leads to excess taxation and spiralling of prices The government should also consider setting up an upper cap on revenue sharing with the mine lessees. National Mineral Index to be brought in at the earliest.
The most efficient way of transporting Iron ore is through slurry pipelines as it causes the least impact on the environment and local population, hence government should expedite these approvals and clearances. Auctioning more iron ore mines and facilitating the opening up of virgin mines will drive the seamless supply of steel for India’s growing consumption.
We are confident of the government’s renewed ambitions and strengthened commitment to introduce and implement sweeping reforms reinforce its strong intentions to build and grow a self-reliant India. Therefore, we are looking forward to a ‘Budget Like Never Before’, as assured by the FM, that will not only be inclusive but also truly transformative.
CEO, ArcelorMittal Nippon Steel India and president of ISA. Views are personal