Steel sector leading revival: Economic Survey

Steel Insights Bureau

The recovery in the corporate sector is being largely driven by steel companies along with entities in cement, automobile, pharmaceutical and food products industries, the Economic Survey 2020-2021 has said.

“Demand conditions in the manufacturing sector moved to the path of recovery with a softer contraction of 4.3 percent (YoY) in nominal sales for Q2 after a contraction of 41.1 percent in the previous quarter due to pandemic led country-wide lockdown. The recovery was led by iron and steel, food products, cement, automobile, and pharmaceutical companies,” the report tabled in the Parliament before the Union Budget said.

Also, the trajectory of the eight-core sector index that includes steel, has been improving since May 2020 and further recovery is expected in the remaining months of FY21, the report mentioned.

The eight-core industries that support infrastructure, such as coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity have a total weight of nearly 40 percent in the Index of Industrial Production.

“Resuscitating steel consumption reinforced acceleration in construction sector, propping up employment as economy unlocked,” it said. The housing market, a key forward linkage sector for steel consumption, saw gradual resurgence from its Q1 trough.

Need to raise production and consumption

Steel is one of the critical inputs to industries, urban development and infrastructure development. “Taking cognizance of the requirement of this critical input in these crucial pillars of economic growth, the National Steel Policy, 2017 envisioned significant expansion in production capacity while being globally competitive,” the report said.

The policy aims at achieving a crude steel capacity of 300 million tons (mt) and a finished steel capacity of 230 mt with a per capita consumption of 158 kg by 2030-31.

The Economic Survey report also pointed out the need to raise consumption along with expansion of capacity in view of low per capita consumption level.

“India is the second-largest producer of crude steel only after China. India is also the second largest consumer of steel. However, its per capita total finished steel consumption was around 74.7 kg during FY20 as against the global average of 229 kg. Further, the capacity utilisation in crude steel plants continues to be low,” the report said.

Production linked incentive

The Union government has taken various initiatives under the Atmanirbhar Abhiyan to enhance the domestic production of steel such as inclusion of ‘speciality steel’ incorporating four different product categories for incentives under the Production Linked Incentive (PLI) scheme; offering steel to MSMEs that are members of Engineering Export Promotion Council at export parity price under the Duty Draw Back scheme of DGFT; measures to provide preference to domestically produced iron and steel in government procurement, where aggregates estimate of iron and steel products exceeds `25 crores; protecting the industry from unfair trade through appropriate remedial measures including imposition of antidumping duty and countervailing duty on the products in which unfair trade practices were adopted by other countries.

Storage capacities

Construction of storage facilities has been undertaken in Public Private Partnership mode in 24 states under Private Entrepreneurs Guarantee (PEG) Scheme through the private sector as well as the Central Warehousing Corp and the State Warehousing Corp.

As of November, a capacity of 144.06 lakh tons has been created under this scheme. Apart from this, godowns are also being constructed through a central sector scheme by FCI in the north eastern states, Kerala, Jharkhand and Himachal Pradesh, the Economic Survey said.

The Government has also approved construction of steel silos for a capacity of 100 lakh tons in PPP mode to modernise storage infrastructure. Against this, as of December 31, a total capacity of 8.25 lakh tons of silos was completed, the report states.