'No chance of steel sector meeting 300-mt goal output by 2025'

The steel sector, which contributes 2 per cent to India's GDP, stands "no chance" of achieving the vision of an annual production of 300 million tonnes (mt) by 2025, a study by economic think-tank NCAER said today.
India, the world's third-largest steel producer after China and Japan, produced 91.46 mt of the metal in 2014-15, a growth of 4.3 per cent over 2013-14.
The study titled Indian Steel Industry: Key Reforms for a Brighter Future -- prepared by the National Council of Applied Economic Research (NCAER) and sponsored and facilitated by Tata Steel -- emphasised on stabilising the industry rather than on expanding it.

"Under the circumstances, there is no chance of the steel sector meeting the 12th Plan targets or achieving the target of 300 mt capacity by 2025 as envisaged by the Steel Policy 2012. Stabilisation rather than expansion is the issue in the steel industry today," the study noted.
Elaborating the circumstances, the study said the steel industry in India witnessed its golden years during 2003-07, but in the last three years, the sector is in doldrums.
"Over the past three years (2010-11 to 2013-14), the profits of steel producers have declined by more than 46 per cent in nominal terms. Medium and small companies in steel have been experiencing huge losses in recent years," it said.

Refering to RBI data, the study said many steel firms are experiencing debt service difficulties and are resorting to debt restructuring with growing incidence of non-performing assets (NPAs).

Companies in the secondary sector are experiencing an increasing excess capacity and are on the verge of collapse unless special financial assistance is provided, it added.
There have been several high-profile exits from capex plans involving companies such as Posco, ArcelorMittal and JSW indicating, among other things, their downbeat assessment of the prospects of their investments in India, it said.
"Our diagnosis is that the poor performance of the steel industry is due to a combination of demand and supply side problems. We identify as many as 11 roadblocks to be removed before we can reach our aspirational goals on steel," the study disclosed.

The roadblocks include demand deficiency, decline of trade competitiveness and surge in imports, financial fragility, excessive taxation, stalemate in land acquisition, project implementation delay, and suboptimal system of mineral allocation.
Other issues are inadequate exploration of mineral, low availability of skilled manpower, high cost and low-quality logistic facilities and inadequate progress in meeting environmental standards, it said.
The Indian steel industry and policymakers "have to strive for realising the bright future that is in sight".