Steel minister says not in favour of protectionist moves

By Neha Dasgupta and Krishna N. Das

NEW DELHI (Reuters) - India's debt-laden steel industry should not take the government's protectionist measures for granted and need to raise their efficiency to compete with foreign companies, the country's steel minister told Reuters in an interview on Friday.

The government has imposed various duties and quality controls on imports over the past two years to stop the inflow of cheap steel from countries such as China, the world's biggest producer burdened with a massive oversupply.

"In my view (protectionist measures) should not be there even for a month, but I have to see the overall position of the industry," minister Chaudhary Birender Singh said in his office.

"I've made it very clear to the industry that on one hand, we are giving this much of protection but on the other hand, I want a roadmap where you can improve upon your efficiency ... (to) narrow down the cost of production and sale price."

Goutam Chakraborty, analyst at Emkay Global Financial Services in Mumbai, said Indian companies typically produce commodity-grade steel with lower returns and are less efficient than foreign companies producing high-end steel.

BAD DEBTS

India's steel sector still accounts for 28 percent of banks' stressed loans, Singh said, but the government measures have helped local companies including JSW Steel, Jindal Steel and Power, Tata Steel and state-run SAIL to raise prices and improve margins.

Lenders now want the government to help the steel sector with more steps to expedite the recovery of their loans, including by asking state companies such as SAIL to buy some sick private steel assets or manage their operations.

Singh said loss-making SAIL or fellow state steel maker RINL were not in a position to buy any assets of private companies struggling to repay loans, but they could help with "expertise" or people.

"It's very strange. When banks advanced loans to these companies, they never consulted me. (But the) responsibility (of sorting the bad loans) now rests with the steel ministry."

The government expects India's steel-making capacity to rise over a third to around 160 million tonnes by mid-2018, for which SAIL will need to speed up its capacity increase that Singh said had not been satisfactory.

The company recently signed a technical agreement with South Korean steel maker POSCO, which Singh hopes will help raise output.

The minister also said Japan and South Korea were keen to invest in India's steel sector and their officials have already met with him.

(Reporting by Neha Dasgupta and Krishna N. Das; Editing by Elaine Hardcastle)