Steel Policy For 2047 Needs To Shift Focus — From Protection To Competition, Pg11

Key Highlights:

• The Ministry of Steel released the Draft National Steel Policy: Vision 2047 to enhance global competitiveness and increase steel exports to 45 million tonnes.
• India is currently the world's second-largest steel producer, with an output of 170 Mt.
• The Indian steel industry's high profitability is largely due to protectionist measures, including a 30% export duty on iron ore and an 18% import tariff on steel.
• Domestic steel is sold at a 6-7% premium over international prices, negatively impacting downstream industries.
• The policy proposes reducing tariffs, removing non-tariff barriers like Quality Control Orders (QCOs), privatizing public sector units, and overhauling mining policy.

National Steel Policy.jpg

Detailed Insights:

• The average profitability (EBITDA over sales) of the Indian steel sector is around 15%, which is 3-4% higher than the rest of Indian manufacturing.
• A 30% export duty on iron ore with over 58% iron content keeps domestic ore prices 30-40% lower than global prices, benefiting steel producers.
• India's import tariff on steel is 18% (7.5% basic duty plus 11.5% safeguard duty), significantly higher than the 3-4% tariff in ASEAN nations.
• Quality Control Orders (QCOs) are imposed on 228 steel products, acting as non-tariff barriers; the Gauba Committee recommended removing 122, but only 59 have been suspended.
• Removing protectionist measures could lead to a significant drop in profitability for major steel firms, with some public sector firms potentially seeing a 50% reduction.
• The policy suggests a calibrated reduction of duties over five years to match ASEAN levels and immediate removal of certain QCOs.
• Privatization of public sector steel plants, such as SAIL, is recommended to improve efficiency and governance, as SAIL's market share has declined from 30% to 10% since 2000.
• Overhauling the mining policy to encourage exploration, similar to practices in Australia, is crucial to boost mineral contribution to GDP.

Key Concepts Involved:

• National Steel Policy: A government framework outlining objectives and strategies for the development and growth of the steel industry.
• Quality Control Orders (QCOs): Mandatory standards imposed on products to ensure quality and safety, often acting as non-tariff barriers to trade.
• Tariff Protection: Government policies that impose taxes (tariffs) on imported goods to make them more expensive and protect domestic industries.