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Global players cite instability, fight shy of buoyant Indian steel market

Some, like ArcelorMittal, Sumitomo Metal may enter only via insovency route, as Make in India, 300 mn tonne production target fail to impress

Aditi Divekar  |  Mumbai 

Essar Steel resolution may take time; deadline could extend beyond 270 days

Despite the government's effort to push 'Make in India' and keep an ambitious target of 300 million tonne production, global producers might find entry into India only through the insolvency route. in tie up with Nippon and Sumitomo Metal are strong contenders for Essar Steel, but this too is after none of the foreign could make any sizeable entry into the domestic market till date

Analysts said lack of stability in the business environment may keep global steel players from entering India in a sizeable way. “The India steel market has immense potential and is a promising one, but it is a difficult market (to do business in),” Sanjeev Gupta, executive chairman of UK-based had told Business Standard.

The company has bid for unlisted which is among the 12 non-performing assets the Reserve Bank had referred for insolvency proceedings in June last year.

“In India, we were looking for an opportunity to grow since 2007-08. We did have very ambitious plans for greenfield plants but opportunities in India were not as good,” Brian Aranha, executive vice-president of told Business Standard without elaborating.

ArcelorMittal, the world's largest steel producer, had planned a Rs 500-billion greenfield steel project in Jharkhand that kept facing delays in land acquisition among other regulatory hurdles.

A closer look at the domestic steel industry has a rather dismal picture in terms of foreign investment towards the sector.

So far, Posco India, the arm of Korean conglomerate Posco has only a small plant in Maharashtra for which it gets the raw material from South Korea. Similarly, Thyssenkrup India, which gets raw material from Europe, has a 35,000 tonne plant at Nashik in Maharashtra.

Meanwhile, has its presence in the country via an MoU with state-owned Steel Authority of India (SAIL) on automotive steel joint venture.

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“Globally, India has a bad image. Cases like Cairn Plc and Vodafone have set a precedent that there is lack of commitment of contracts and laws can change in India anytime. These give bad signals to the global market. In the process, we realised, no one is ready to come to India,” said one of the bankers involved in the process.

Large like POSCO, which had signed a Memorandum of Understanding (MoU) in June 2005, to incorporate an Indian subsidiary and build a $12 billion steel plant in Odisha is still to see the light of the day. “The company has refrained from participating in the process where assets were readily available, simply because of the unreliable policy environment,” said a Mumbai-based POSCO product dealer.

“The government needs to set the stage right if they want global players to make big investments in the country for a long-term purpose,” he added.

Analysts were of the view that due to the permanent nature of investment of (FDI), the country has not attracted sizeable as against the (FII) who have the flexibility to pull out their investments in times of hostile or adverse investment climate.

Currently, India's total steel capacity stands at around 125 million tonne and to reach the target of 300 million tonne another 175 million tonne capacity needs to be added. This implies that annually about 13 million tonne greenfield capacity needs to come up in the country to achieve the target by 2030.

Every one million tonne capacity needs an investment of Rs 60 billion and hence a 13 million tonne new capacity per annum would ask for an investment close to Rs 780 billion. Given the investment potential, the sector has, India certainly has to set its stage right for global players to make its policy deep-rooted.

At present, per capita steel consumption in India, the world's third-largest producer currently stands at 68 kg as against a global average of over 200 kg.

Nevertheless, global players seem to be choosing an inorganic route to enter the Currently, Luxembourg-based ArcelorMittal, the world's largest steel producer, in consortium with and Sumitomo Corp (NSSMC) is bidding for under NCLT process.

is a strategic fit for us as it has right scale and the kind of products we think we can grow in India. So that is why we have a keen interest in this. In this way, we plan to enter India and support the government policy of Make in India,” informed Aranha.

First Published: Fri, April 27 2018. 01:01 IST
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