From the Desk

Steel Industry Finds Mixed Bag in Budget
Indian steel industry has been languishing long over rising input cost and falling demand. The margins of domestic steel producers are likely to be squeezed further with the increased freight imposed by the Ministry of Railways in its Budget 2015-16. Indian Railways has hiked freight on iron and steel by 0.8 per cent and 6.3 per cent on coal, a move seen as unjustified in times diesel prices are ruling low.

However, with the domestic steel demand yet to pick up, domestic steel producers are unable to pass on the rising input costs to the end users.

India's steel consumption grew by just 0.6 per cent in the 2013-14 fiscal, its lowest in four years, to 73.93 million tonnes. During the Apr-Dec period of the current fiscal, it grew by a mere 1.4 per cent, largely because of the slower expansion of economy.

Besides, from a net exporter of steel last fiscal, India has turned out to be a dumping ground for China, Japan, Korea and Russia. In the first 10 months of this fiscal, imports were up by 69 per cent to 8.1 million tonnes against 4.8 million tonnes in the same period last year. In 2014, imports from China alone accounted for 2.83 million tonnes against 1.25 million tonnes, an increase of 128 per cent.

However, the Indian Railways' massive Rs. 8.5 lakh crore of investment over the next five years in new capacity and lines presents a huge growth opportunity for the Indian steel industry. 77 new projects have been announced which will cover 9,400 kms. doubling / tripling / quadrupling of railway tracks and other capacity building adding to improved steel consumption.

There are many other takeaways from the General Budget 2015-16. Moving ahead with Government's focus on building infrastructure, introduction of tax-free infra bonds for railways and roads has been announced. In this regard, allocation of Rs. 25,000 crore in Rural Infrastructure Development Fund and Rs. 70,000 crore has been announced for infrastructure development which will spur steel consumption.

Government has also announced to lay 1 lakh km of new roads across the country, a major step which will spur steel demand. Allocation of Rs. 2, 46, 726 crore, an increase of 9.87 per cent over last year with a focus on 'Make in India' for quick manufacturing of Defence equipment is also likely spur steel demand apart from general focus on manufacturing sector.

On the direct front, Government has hiked tariff rate on iron and steel and articles of iron and steel increased from 10 per cent to 15 per cent to stem a flow of cheap supplies particularly from China and Russia. A barrier on steel imports would lead to offer a better playing ground to the domestic steel producers, much in line with the anti-dumping duty of US.

Overall, Indian steel finds a mixed bag with hope for spur in demand from the railway and general budget.