At a time when the US and China are in the middle of a global trade war, Binoy Kumar, Secretary, Ministry of Steel, talks to Sumant Banerji about plans to encourage companies to Make in India and how India can protect its steel industry. Edited excerpts:
Growth in India's steel consumption is getting a lot of attention these days. Is the industry prepared to meet the demand?
A: India's demand for steel is growing at over 7 per cent. To cater to that, the industry is expanding both capacity and production. We are a low steel- consuming country. Our consumption is 69-72 kg per capita. It is way behind the world average of 214 kg. Some advanced countries are at 1,100 kg. Our primary task is to meet this demand and for that the industry has to grow.
The National Steel Policy 2017 set a production target of 300 million tonnes by 2030/31. We have always missed targets.
There is no target in the policy. It is not even an aspiration. It is a blueprint for meeting demand. If demand is rising at 7 per cent per annum, we will need 230-240 million tonnes (saleable steel) capacity by 2030/31, and for that we need (crude steel) capacity of 300 million tonnes. That is how the calculation was done. Demand is more important than capacity. When an industry is 80 per cent private sector, the most important thing is whether it makes sense to set up capacity. Demand drives capacity.
We have seen high imports in the past, even dumping. India's high consumption will remain attractive to the world. As a globalised economy, shouldn't we be okay with it?
The question is whether we support this consumption by our own industry through Make-in-India or supplement it with imports. The government's viewpoint is clear that the first emphasis has to be on Make-in-India and our own industry. It is a strategic industry. It is important that it gets due recognition. No country can develop without taking care of its steel industry. Let's take the example of rail. This is one item that needs to be produced within the country.
There are some value-added products that we do not make in sufficient quantities and user industries complain when import restrictions are put in place.
Some imports will always take place. That is not an issue. But we cannot come to a stage where imports meet a sizeable part of our demand.
Lack of capacity can hamper upstream industries. We know there was a shortage of rails as SAIL was not producing enough at one point in time. How do we overcome that?
It is important that we are in a position to supply rails. The world over, rails are supplied by domestic industry. Today, rails are primarily being manufactured at Bhilai plant of the Steel Authority of India and lately by Jindal Steel and Power. It is a good thing that more players are coming in provided they meet the specifications of the railway ministry. We have asked the railways to give us a 10-year roadmap because steel-making is not an easy job. It takes time. SAIL has added capacity. It has a brand new universal rail mill of 1.2 million tonnes. It has an old mill with another 0.7-0.8 million tonnes capacity. If railways give us a 10-year horizon, it can increase capacity accordingly, and others can join. The same is true for defence. We cannot have Make-in-India in defence unless the steel industry is prepared for it. So, we need to produce that kind of value-added steel in our country. It is slowly happening. We are progressing on the direction of adding capacity. But we need to expedite it and give the industry more encouragement.
Globally, governments subsidise or use non-tariff barriers to support the domestic industry. What measures are you referring to for encouraging domestic players?
We are not giving any subsidy support to our steel companies. But we need to provide them inputs at competitive prices if they have to be competitive.
Almost a third of the iron-ore mines in India would be up for auction in April next year and there could be a major disruption in supplies to the steel industry. Is that a worry?
We are working very closely with the Ministry of Mines. They are working on it and very conscious of it. I am confident there will be no disruption as such. It is not a matter of worry. We do need to develop the mining sector, make it more efficient and increase their production so that they are in a position to meet the going requirement of the steel industry. It should be a win-win situation for both. Our steel industry requires iron ore at competitive prices, because if it gets expensive it will jeopardise their operations.
How competitive is the Indian steel industry compared to others globally?
It is an ever-changing thing. What used to be the case 10 years ago is no longer the case today. The private sector has taken pains to improve techno-economic parameters - for example, in the kind of inputs they use such as coking coal, a lot of improvements have been made. A lot of automation has been introduced. Even the public sector is trying to follow. It will take them a little time as this requires a lot of investment and the public sector has already invested a huge amount for capacity expansion. The next step for them will be to improve their techno-economic parameters. Anyway we have to follow our COP21 commitments, which means becoming more efficient. Our steel industry is gearing up for the future in emissions as well as technical parameters.
There are high overhead costs due to poor logistics and higher power prices. How can one counter these?
It is true we have these challenges. I am happy the government has recognised the need for integrated development of the logistics sector. For the first time we have a special secretary in the ministry of commerce dedicated to improving logistics in the country. Steel is one of the major users of logistics. We need to have a proper logistics set-up to ensure we can support 240 million tonnes steel making - this means handling at least three times more raw material. This is a serious challenge. We need alternatives to rail. Inland waterways and coastal shipping are options, but they need to be speeded up. Increased use of conveyor belts and slurry pipelines is also required. Power is expensive and we don't get natural gas, which is a handicap. We have to see whether increased generation of renewable energy can partially solve this problem.
How can you tackle the high cost of credit which, in a cyclical industry like steel, can wreak havoc if times are bad?
The Insolvency and Bankruptcy Code has been a big help. Some of the best resolutions have happened in the steel sector. Credit has been a problem for us and there is a historical baggage. Now, with the steel industry once again able to stand on its feet, we feel this problem will slowly die down. The banking system needs to see that this industry has a future.
There is an impending trade war between the US and China. China happens to be the largest producer of steel and the US one of the largest consumers. Is this a worry for India?
We have to see that our steel industry is not vulnerable to trade wars and gets raw material security. Industry requirements should not be subjected to problems of international trade. We have global excess capacity and India, with its growth in consumption, is a very attractive destination for that. Imports have also started going up. Some of that is required for automotive and electrical sectors. These are areas where we are lacking production. Our user industries like automobiles keep changing, so we should have the capacity to change as well. We definitely need investment in these sectors. We want investment in value-added steel. Our people are focussed on the domestic requirement and we are keeping a close watch on imports. The major steel-consuming regions - the US, the EU, Canada, Turkey have safeguard duties. China has overcapacity and we have FTAs with many countries. So, these are the challenges that we have to keep in mind.